AlexAdults also use banks to purchase big-ticket items like cars, homes, or education. Again, if you have good credit, the bank can help you with a loan — which is another type of credit. Loans are different from credit cards because they’re for a fixed amount and are usually for a specific item. Plus, once you pay off a loan, it doesn’t renew itself.

Car, house, and college. Loan document and money coming from a bank

AlexRemember, with credit cards, it works a little differently. You’re given a limit on how much you can borrow. You can charge up to that limit — or charge nothing at all. And if you borrow it all, and repay it, your credit is renewed — but only if you repay it.

Once again, having good credit can help you get loans. With loans, like loans for a house or a car, you know exactly how much you’re going to have to pay each month, and for how long. It’s smart to shop around for a good loan and get a good interest rate.

Remember, an interest rate is how much money the bank is going to charge you to borrow their money. Generally speaking, the interest on loans is less expensive than the interest on credit cards.

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