Credit can be a powerful tool that helps you improve your finances, get access to better financial products save money on interest, and can even save you from putting down a deposit opening utility or cellphone accounts. While some people have stories about being burned with credit in the past, when manage responsbly it can be an incredible asset. Here are some example of situations which shows the advantages of having a credit.
1 . Save on interest
The biggest benefit of good to excellent credit is saving money. When buying a home for example, good credit can easily save you tons or even hundreds and thousand of money on a mortgage loan. Auto loans, credit cards, private student loans, personal loans and lines of credit typically give lower interest rates to people with better credit. If you plan to buy a home with a mortgage in the future, good credit might be a deciding factor in how much home you can afford and whether or not you can buy a home at all. But saving on interest is just one of many ways having a good credit score can benefit your finances.
Another example scenerio: Here in highlands area, having a credit is a common thing. Currently, my mom used to lend other people in need as well, but with interest of course. A lot of people here are always short of money, but of course my mother's money isn't enough for them. What my mother's going to do is that she will also borrow money from someone here in our area (Her name is Lydia, she's my teacher when I was in grade four). She lends money to my mother with low interest rate compared to the other who borrowed from her because my mom has a good background. Say for an instance, she lends it for 7 percent interest, my mom lends it with 10 percent interest. In this given example we can easily see that my mother saves on interest and earns at the same time.
2. Meet Emergencies
Unexpected things in life will happen. When or where someone may have an accident and plan ahead of time,one cannot say. When things like this arise,a person does not have enough money or cash to spend for the unseen expenses. He/She may have a property to sell, but before it can be turned into cash, it will take a long time. This is why many people,as crisis occur turn to getting a loan.
Another scenario: Our place is a secluded one. Except for a troll, there is no other way to reach it. Despite this fact, we still placed a small sari-sari store business in this location because it's very inconvenient for those people living in our area to go to the city just to buy small items, like for example salt, sugar or coffee. So this is the situation. Whenever people need something here , they'll go to out house get it through credit. I remembered complaining to my mother because this is not the right to do business but she will just shrug her shoulders.
3.Manage your Cash flow/Get something you can't afford now/ Use something while you pay for it
When you buy a new purchase with a credit card, you don't have to pay for it right away. The bank puts the money up when you swipe your card and you'll pay it back later. If you pay off your entire balance in full by the statement of due date, a good habit to get into, you won't pay any interest on those purchases. From the date you buy the purchase, you have the time until your next closing date you have the time until your next closing date plus about two three weeks before you have to pay up. That can mean three to seven weeks of interest free borrowing that allows you to pay off your balance on a date that's convenient to you.
4.Avoid and limit financial Fraud
If you used your debit card and someone steals your card number at a gas station,restaurant or online,the cybercriminal has access to drain all of the cash from your account. That can leave you unable to pay the rent or mortgage, without fund for food, and it can take months to get your money back if you can get it back at all. Your fraud liability on credit cards is more strictly than debit. If someone does make unauthorized purchase on your account you jusy have to tell the issuer and they will wipe the charge from your statement.
5.Convinience
Using credit cards when you travel or shop is more convenient rather than carrying a cash. It also provide a handy transactions. Using credit may also give you some bargaining power if there is a dispute or disagreement involving a purchase.
It's not a negative thing to have a credit or loan. The balance sheet won't be even balanced without it. The point is whether the credit will be advantageous or not, will depend on where and how a wise person will spend.