In: Categories » Legal and finance » Debt and credit » The benefits of debt and credit
|
When you, and millions of others like you, buy with credit, you’re fuelling our economy by increasing the demand for goods and services. Your spending creates work, jobs, and wealth for the people who provide those goods and services— and it brings money in interest payments to banks and other lenders. The money from your spending encourages innovation and invention as people look for ways to design better products and new, more efficient ways to deliver services to sell to you. And that growth and innovation is what moves all of us, over time, to a better life. That’s the big-picture benefit of debt and credit. At the individual level—yours— credit has immediate benefits, too. Used carefully, it allows you to buy what you need now and pay for it out of your future earnings. Credit in the form of home mortgages is the lever that allows ordinary people to own their own homes and gradually build a valuable investment for their future. Student loans allow people who couldn’t otherwise afford it to attend school and learn skills that increase their earning power. Until the early 1970s, credit was available to most people only for significant purchases—a home, car, or big piece of furniture—where the lender had something valuable to recover if the borrower fell behind in the payments. Lenders were cautious about loans and made sure they had an easy way to recover the money if anything went wrong. For most purchases, people saved until they had enough to pay cash. That changed with the introduction of credit cards in the 1970s. Lenders discovered a huge and profitable new market of borrowers. And we, the credit card spenders and borrowers, discovered the convenience of cash-free spending and the pleasure of getting what we wanted without waiting until we had the cash to pay for it. Sure, some people got into debt trouble and ended up unable to pay 8their credit card bills. But the money the credit card companies made on the majority of customers who kept up with their payments more than balanced out those losses. Which leads us to where we are today. We live in an age of easy credit. And that requires a new kind of financial discipline and self-control. Credit makes it easy for us to get what we want. But it also makes it easy to get into serious financial trouble.
|
legal disclaimer
1) Our website is not responsible for the information contained by this article as well for any and all copyright infringements by authors and writers. E-articles is a free information resource. If you suspect this article for any copyright infringements, please read the Terms of service and contact us to investigate the problem.
2) The E-articles directory team is not responsible for inaccuracies, falsehoods, or any other types of misinformation this tutorial may contain and will not be liable for any loss or damage suffered by a user through the user's reliance on the information gained here. Please read the Terms of service
Useful tools and features
If you like this article (tutorial), please link to it from your web page using the information above. Linking to this page, this is the only way to help us improve our service, the same time providing your visitors with a way to improve their online experience.
related articles
If you’ve fallen behind in your payments, that information is probably being reported in your credit record. What is a credit record? And why should you care? Whenever you apply for a loan or a charge card, and many times when you apply for an apartment or a job, someone will check your credit record to see if you have a history of paying your bills on time. Your credit record shows all of the loans and credit accounts you’ve had for the past seven years, and records every late payment....
2. Factors for calculating your Credit Score
Payment History (on an average 35% of your score is based on this history). When you apply for a loan the first thing that a lender usually examines is whether you have any unpaid credit accounts in the past. This is because any history of late payments may decrease your score although this happens in rare occasions. A late payment occurring once or twice is outweighed by an overall good credit picture. Again if you do not have any history of a late payment that does not mean that your credit score will improve. This is...
3. Nonfinancial Factors That Affect the Credit Decision
As virtually every credit professional knows, making a credit decision is as much an art as it is a science. The stark financial analysis may indicate that the customer should not be granted credit terms, but there are often other factors to be considered. Here is a brief look at some of the nonfinancial issues that affect the final determination: • The 5 Cs of credit: character, capacity, capital, conditions, and collateral. One credit analyst revealed that his company routinely sold on open-accou...
4. The four steps to reduce your debt
There are 4 basic steps that will help you get out of debt. 1. Admit that you have a problem and commit yourself to fixing it. Only you can solve your debt problem. And you can only solve it if you decide that it’s a problem worth solving. There are a few ways of making that commitment. Some experts recommend writing a statement owning up to the problem and signing it. Others suggest that you call a family meeting and have an open discussion of the debts you face. A debt problem is ...
The following types of long-term debt are covered here: 1. Term loans 2. Bonds 3. Debentures 4. Mortgage bonds 5. Convertible bonds 6. Senior debt 7. Subordinated debt 8. Junk bonds Term Loans. This is the form of long-term debt most frequently used by businesses. It is a loan from a bank to acompany that is used to finance expansion efforts. It has afixed maturity date, frequently five to seven years from the date o...
6. Tips to improve your Credit Score
Below are described general tips on how to improve your credit score. 1. Always try to maintain a good track record of paying your bills on time. This will help you to enhance the credit score. 2. Be aware of the fact that when you miss a payment on any collection accounts and try to close the account the report of the account will always be there on your credit report. So try to avoid that. 3. Visiting a credit counselor will not affect your credit score or make you lose some points. Ins...
7. Where to ask for help when getting into debt
An expert can help you translate the information and suggestions and from other sources into a personalized plan that takes into account all of the factors that make your situation unique. An expert can tell you how serious your problem is, whether you’ve analyzed your numbers correctly, if there is other information you should be thinking about, whether it’s worth trying to negotiate with your creditors to reduce your debt payments. And both a credit counselor and a support group can help you put your probl...
8. Benefits of Credit Score
Older credit problems do no count much Your past credit problems is not a major problem because credit score always value positive information more than credit problems. Any recent good payment options made by you which depicts that you are doing your best to manage your credit record regularly will have a positive effect on your credit score. Faster loan approval: Since scores can be availed in minutes from any of the major credit bureaus, lenders can process loan applications much faster. Nowadays eve...