And you can use this almost anywhere that that line of credit is available.
So most company,
many stores, different services take almost any number of credit card brands.
And right, that's your revolving credit.
You have a limit.
You can spend up to that limit.
You pay it down.
You can charge it up, you can pay it down, you can charge it up.
What the way those work are is that there's going to be a minimum payment that
you have to make each month.
This is typically 2% of the balance.
Hot most of the time.
And your interest rate can as I said before,
may be fixed where it's the same no matter what, unless you miss a payment, or
it's flexible where it varies actually with the overall state of the economy.
If the overall interest rate goes up, so does your credit card interest rate.
If the overall interest for the economies go down.
Credit card interest rate may go down.
Installment debt is a little different.
Right, this is going to be something that you get typically for a specific item,
a specific purchase.
So, common examples of installment credit are car loans, student loans,
so we'll get something,
we'll get the money, we'll use it to make a purchase and then we'll pay that back.
Typically periodically, almost commonly, every month, so car loans again
being a great example of this, you get a set limit and a set payoff time.
So when we make payments and we're reducing our balance,
we don't then get to go charge up more, like we put on a credit card.
It was really that one time use type of purchase.
And as with revolving.
The APR can be both fixed or it can vary.
So, there's a few types of things we want to think about.
Calculating the cost of credit is one.
Here we have the Truth in Lending Act as a great example in this.
I generally refer to this as TIL, but
we'll call it the Truth in Lending Act for today's purposes.
So the Truth in Lending Act requires a few things that need to
be disclosed to anyone.
In other words, what the Truth in Lending Act says is we need to make sure people
can compare across different types of credit.
So it requires that everybody disclose the rate that you're going to be
charged interest and the particular form with all the annual percentage rate.
And this accounts for all of the different elements that can go