4.2 Types of credit

In this section:

• 4.2.1 How credit works
• 4.2.2 Credit options
• 4.2.3 The cost of borrowing
• 4.2.4 The effect of interest
• 4.2.5 The cost of different types of credit
• 4.2.6 Case study: Deferred payment plan
• 4.2.7 Payday loans
• 4.2.8 Tips to keep borrowing costs down
• 4.2.9 Joint borrowing
• 4.2.10 Rights and responsibilities
• 4.2.11 What to know before you sign a loan agreement
• 4.2.12 Summary of key messages

Introduction

It may be easy to borrow money—but not so easy to pay it back. That's why, if you borrow, you need to know exactly what you're getting into and understand all your options.

How do you know what is the best type of credit to use? Should you finance your car through the auto dealership or through your financial institution? Should you get a student loan for your post-secondary education or take out a bank loan?

This section covers the different types of credit that are available and how they work. In it you will learn:

• the features, advantages and disadvantages of different types of credit
• how interest rates and other factors affect the cost of a loan
• how to calculate the real costs of borrowing
• how to be a smart consumer when you borrow
• your rights and responsibilities as a borrower.

By the time you finish this section, you will know more about the different credit choices that are available to you and be better able to make smart borrowing decisions.