Nobody who lived through the financial crisis at the end of the “noughties” will have been left with the idea that it’s desirable to live a life based on credit. The number of bankruptcies, repossessions and other issues that arose from a time when credit was freely available and widely-encouraged has been enough to convince some people that they would rather go without something than borrow to pay for it. The present generation of young adults is, as a result of the bad decisions of previous generations, smarter with its money than most.
There is plenty to admire in that philosophy, too, as you can’t be strangled by debt if you never take any debt on. In the main, if you can afford to pay for something with cash, you should. If you have the time to save up for a big purchase, then you ought to. The less debt you carry, the lighter your load will be when you need to make big decisions, and as always, there is a “but” coming here, so let’s get to it: Sometimes, it’s a decent idea to borrow on a limited basis for specific reasons. If you do it within the principles set out below, it will work in your favour.
Limited borrowing helps your credit rating
Yes, it’s true that your credit rating mostly affects what you can borrow – so if you don’t want to borrow, why should you care about your credit rating? Well, because your landlord might, now or in the future. Landlords can ask tenants to undergo a credit check before renting to them, and if you don’t pass that, you may find it hard to rent. Considering that the alternative to rental is often looking for a mortgage, this is worth bearing in mind. So is the fact that potential employers are increasingly running credit checks on prospective new hires. The best way to build your rating is to use a low-interest, high-incentive credit card for regular purchases, and pay it off immediately.
Borrowing for the right things can save you money
We all need transport to get around, and with a number of jobs migrating outside big towns and cities, it’s not always possible to commute for your job. More and more of us are having to drive in order to be employable, so we need a car. You could go to a local dealership and pay as little as possible for a basic runaround – but anyone who has tried this approach knows that it ends with repeat trips to mechanics, and time and money lost to the bargain option. Sourcing Quick Car Credit can allow you to get a reliable drive, and may be the only way that you can get one that meets the needs of a struggling planet.
You should only borrow what you need, not what you’re offered
Let’s be clear about one thing after the last two points: limited borrowing is worthwhile, but this still doesn’t mean that adding more debt is a good idea. When it comes to sourcing a loan for a necessary purchase, you might find that you are offered a bigger amount than you need. This is money you’ll have to pay back eventually, so remember that part when you’re looking for a loan – the less space you have to find in your budget every month, the better.