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This post, “Credit Consciousness is Key to Financial Health,” is sponsored and authored by Ethan who writes for Readies.co.uk. It presents a clear message on the importance of credit consciousness as a component of overall financial health.
Credit Consciousness & Financial Health
Modern consumers face myriad borrowing and credit alternatives, tempting them to buy on margin. From daily-use credit cards to home equity financing (and everything in-between), existing credit options help users cover wide-ranging costs of living. Using credit is not only convenient, but access to loans makes it possible for consumers to make big-ticket purchases they otherwise could not afford.
With so much at stake, building and preserving a strong credit rating is an essential financial pursuit. If you are armed with a sturdy credit score; financing is at your fingertips. A troubled credit history, on the other hand, can limit your options. And since credit missteps are hard to overcome, keeping-up with bill payments and other credit obligations is the only way to ensure a healthy credit score. Whether you are in the market for a loan or simply strengthening your financial understanding, consider the following credit concerns.
Borrow Only What You Need
Well-managed debt does not strain household cash flow. On the contrary, loan payments and other obligations are a natural part of personal finance. It is only when debt levels rise beyond your ability to pay timely, that you become vulnerable to financial difficulties.
Consider the long-term ramifications of opening credit accounts and taking-on debt. Building balances on credit card accounts, for instance, can rise to an unmanageable level, leaving you to pay interest only, minimum payments. Too often, the cycle becomes unbreakable, as income levels are insufficient to chip-away at the principle balance. Worse yet, adding new charges – even as oppressive balances linger, can lead to delinquent payments, default, and damaged credit.
In order to hold debt at reasonable levels, prioritize the way you use credit. In other words, apply loans and personal financing when they are most needed, paying cash for day to day purchases. By limiting credit card use to a convenience, rather than a bank account, you’ll stay timely with monthly payments, and remain on the right side of creditors.
Evaluate Lending Options
Financing options fall across a wide range of banking products. Long term mortgages, for example, serve high-dollar real-estate deals, extending low interest rates for decades. Short-term, fast cash loans, like payday loans are available at the other end of the spectrum, using your future pay as collateral for money today. Personal loans, consolidation loans and secured equity alternatives offer even more choices for borrowers, supplying funding for everything from home improvements to automobile purchases.
Whether you’re in need of quick cash or a 30-year fixed residential home loan, evaluating lending options from several providers is the only way to be sure the financing you select has a competitive rate and favorable terms. Before committing to installment credit, compare financing terms online. And don’t hesitate to shop around for the most affordable forms of revolving credit, protecting you from predatory interest rates and unreasonable credit card fees and penalties.
Use the Best Loan for the Job
Several distinct forms of financing are available to consumers, so it is important to match the types of credit you use to the jobs at hand. A credit card charge, for instance, would not be well-suited for a big-ticket purchase to be paid-off over time. In this case, an installment loan or low-interest equity financing would be a better alternative, resulting in lower interest payments.
On the other hand, day-to-day purchases you intend to settle at the end of each billing cycle are easily managed on a revolving credit account – often earning “miles” or reward “points.” Depending upon the urgency of your financial need, you may select a short-term, “payday” loan to help bridge a financial gap. This type of financing is issued without a formal credit check, so it doesn’t take long for applicants to receive needed funding. As long as you have a job and pledge to pay timely, payday lenders are willing to float a short-term loan. Late payment triggers penalties and fees, so this type of loan is not cost-effective, beyond a single pay period.
The way you manage credit has a meaningful impact on your financial health. By staying informed and evaluating credit options up-front, you’ll avoid missteps and build positive credit relationships. Turning away from credit challenges, on the other hand, leads to financial instability and can limit your options for future financing.
How do you maintain credit consciousness?