What is Credit? And what’s the use?

Credit (of Latin credit, “he / she believes”) is the trust that allows a party to provide money or resources to another party, when that second party does not reimburse the first party immediately (thereby generating a debt), but , instead promises to pay or return those funds (or other materials of equal value) at a later date. In other words, credit is a method of making reciprocity formal, legally enforceable, and extendable to a large group of unrelated people.

Resources provided may be financial (eg granting a loan), or may consist of goods or services (eg consumer credit). The credit covers any form of deferred payment. The credit is granted by a lender, also known as a lender, to a borrower, also known as a borrower.

Adam Smith believed that barter preceded credit in history, but more recent anthropological research proved otherwise. For the most part, the exchange took place between those individuals who do not trust each other, for example, hostile or unknown tribes usually make their transactions through barter. On the contrary, members of the same tribe mostly settled their transactions in credit \ debt.