Generally, a loan is the lending of money by one or more individuals, organizations, or other entities to other individuals, organizations, etc. The recipient of loan, who is the borrower, incurs a debt and is usually liable to pay interest on that debt as well as to repay the principal amount borrowed until it is fully repaid.
Many people are not aware that there is a bad and a good debt. Some household avoid loans to the point that they refuse to have credit cards or even an instalments. It is true that debts are bad. However, financial intelligent has taught us that leveraging debt can be a useful financial tool if you know how to use it in the right way.
Impulse buying and purchasing unnecessary items is bad debt. But using it for urgent and essential expenses, like student loan, mortgage, business loan, or buying a laptop for your daughter’s school needs, is good debt. The purpose is what matters most.
Healthy Financial Position
Eating a balanced diet, getting enough sleep, and exercising every day will make you physically healthy. You do not have to go into gym, but it is an advantage if you do.
In the same way, monitoring your cash flow, growing your savings and investments will lead to a financially healthy life. When you save, you do not need to apply for student loan, installment or any loan, but there are financial advantages if you do apply for a good loan.
For instance, having a good credit score will give you higher chances and faster approval for home loans. Additionally, you can negotiate for lower or better interest rates during application.
And while you can just save and invest for the home loan, it will take you much longer to reach your target amount. Furthermore, growing a business is easier if you have a credit line.
Thus, having a credit card or applying for a loan is not absolutely bad for your personal finance. Sometimes, short-term debts will help build your credit score, which you can leverage to achieve bigger financial goals.
Credit Market
Nowadays, there are a lot of easy loans in the financial market. In fact, many companies are providing easy unsecure personal loans. You can even just apply online or through a mobile app.
However, most of these unsecured loans have high interest rates, and you get no additional benefits or value from them.
In the United States for instance, the majority of debtors borrowed personal loans for the purchase of an essential gadget, equipment, furniture, or appliance. And if that’s the case, then we recommend that it’s better to simply buy through Home Credit.
Home Credit allows you to be financially responsible while building your credit score and financial credibility. Plus, they offer value-added services such as device protection, insurance, and family and health protection.
Costumers of Home Credit can enjoy their offers of zero percent interest on selected items, flexible payment terms, affordability, and accessibility. With Home Credit’s zero percent interest offering, you’ll be paying manageable monthly installments based on the standard price of the item with no interest to your payments. This is one way for you to make faster progress on reducing debt.
In conclusion we can say that credit is one of the most misunderstood and misused financial tools. If you know how to use it in your advantage, then it can help you achieve your financial goals faster and easier. Otherwise, you could drown in debt and experience financial difficulties.