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What is Credit?
Credit is an agreement that allows you to buy now and pay later. Whether you are borrowing from your parents or your credit union, credit works just the same. You borrow money upfront to make your purchase, and eventually pay it back according to the terms that you’ve agreed on. In terms of a loan, credit also includes interest. Interest is the extra amount, usually a percentage, which you agree to pay in addition to the loan amount. Interest is basically the fee you pay for the convenience of borrowing money.
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