When it comes to loan and credit, many people think they have things sorted out. However, after learning what each one is about, you will have better management when it comes to each one of the cases. We have talked about the differences between credit and loan before, but you should know the main difference between them is the interest rate applied to each one.

This time, we’ll talk about credit. Credit is at your disposition at most times, and you can use it at your convenience. There’s a limit, but you have a certain sum available at any time. However, every purchase made through credit will be paid with a certain percentage of interest. It’s like paying the company for the favour they’ve done to you.

There are certain people who use credit recklessly, either due to anxiety problems or just because purchases are made easier this way. Whether is the case, here we’ve written some tips for credit management for you to consider next time you use it.

1. Learn when is most convenient to use credit

Not every situation is favourable when it comes to credit. We recommend you to use it only during situations where:

• You will acquire benefits of great value, like a car or a house.
• Education is a priority. Whether it’s for you or your children, there are several financial entities which help people with their studies.
• You will invest, for example, to establish your own business. If you plan things properly and everything goes well, you can be sure you’ll be able to pay the credit in little time.
• You can obtain credit at a less interest rate or without it at all.


Use your loans and credit cards wisely for successful money management.

2. Learn when is not convenient to use credit

Although the previous situation can be seen as favourable, those are the cases where people don’t use credit. Unfortunately, most people use it for the situations we are going to name below. Take into consideration the following list, because credit use isn’t recommended during the following cases:

• Credit should not be used for common purchases, like clothes, foods, gifts, etc. All of these expenses should be made within a budget you currently have available, because they need to be paid at the moment you request them. If you’re using credit for things like these, then you’re probably wasting more money than you’re currently earning.
• Credit cards have the highest interest rate in the market. We don’t recommend you to use it if you want to have great financial management.
• Do NOT use credit to request loans.

3. Credit is great, but bad management will have a negative effect on your finances

Sometimes, we do not have money to pay for certain things, and we end up using, for example, a credit card to complete the purchase. However, unless what you’re buying is strictly necessary, you will be affected in a negative way. As we said above, credit cards have highest interest rate in the market, and although they have a limit, you still have to pay for all the interest which comes with every purchase you make with the use of it. Unlike a no credit check payday loan where interest is calculated over the total sum; when you use credit it applies to every purchase you make.

Bad credit management will put in risk your finances, with the possibility of leaving you bankrupt. To avoid this case, you should learn how to take care of your finances properly without having to recur to this method. For example, if you are going to purchase a house, ask a close person first before considering using credit.

Leave a Reply