What Is Consumer Credit?

Credit is an arrangement to receive cash, goods, or services now and pay for them in the future. Consumer credit refers to the use of credit for personal needs by individuals and families as contrasted to credit used for business or agricultural purposes.

Although Polonius cautioned, "Neither a borrower not a lender be," using and providing credit have become a way of life for many individuals in today's economy. Consumer credit is based on trust in the consumer's ability and willingness to pay bills when due. It works because people, by and large, are honest and responsible.

There are two types of credit: closed-end credit (also known as "installment credit") and open-end credit (also known as "revolving" credit).

Sources of Consumer Credit: There are numerous sources of consumer credit