Borrowing is an important tool in personal financial planning. Some common and necessary uses of credit are housing loans and car loans. These credit facilities are ordinarily given by banks or finance companies to enable the buyers to buy the homes or cars now that they otherwise could not afford.
Credit helps to pay for goods and services that cost more than you can afford now. It enables you to acquire expensive assets like a house and car without having to pay for them fully for many years. This is because payments of loans are scheduled and spread over a long period of time.
Loans also enable you to meet emergencies such as unexpected unemployment. Though savings ought to be the preferred way to deal with emergencies, credit can be a useful standby financial resource. Just about anything can be charged to the credit card. It is not only safer than carrying cash, the spending record it keeps also aids the budgeting process. Convenience is increasingly the prime motive for borrowing.
Beware of Misuse
Overspending may be the greatest misuse of credit! Consumers may be overwhelmed by their sudden ability to buy things that they get 'hooked' on credit. The problem is over-spenders will not admit they are spending too much, thinking that so long as they make the minimum repayments they are all right. Unfortunately, they don't realise that they must eventually pay in full whatever they have spent. They fail to foresee the consequences of not being able to do this. Failing to meet credit card payments may eventually cause a damaged credit history and lawsuits by credit companies, which might lead to personal bankruptcy.
Credit helps to pay for goods and services that cost more than you can afford now. It enables you to acquire expensive assets like a house and car without having to pay for them fully for many years. This is because payments of loans are scheduled and spread over a long period of time.
Loans also enable you to meet emergencies such as unexpected unemployment. Though savings ought to be the preferred way to deal with emergencies, credit can be a useful standby financial resource. Just about anything can be charged to the credit card. It is not only safer than carrying cash, the spending record it keeps also aids the budgeting process. Convenience is increasingly the prime motive for borrowing.
Beware of Misuse
Overspending may be the greatest misuse of credit! Consumers may be overwhelmed by their sudden ability to buy things that they get 'hooked' on credit. The problem is over-spenders will not admit they are spending too much, thinking that so long as they make the minimum repayments they are all right. Unfortunately, they don't realise that they must eventually pay in full whatever they have spent. They fail to foresee the consequences of not being able to do this. Failing to meet credit card payments may eventually cause a damaged credit history and lawsuits by credit companies, which might lead to personal bankruptcy.
