Leverage on Credit for Funding

Credit financing Opportunity

One very fine day, a credit agent comes up to you and promote some of the most lucrative credit financing opportunities in the current market, what would you do? It can be easily admitted that many individuals, especially common folks in town, will not hesitate to take up such irresistable deals with some bargains from the credit house. However, there must be a certain level of vigilancy when it comes to utilizing unearned cash. The individual has to assess his current lifestyle and understand hos credit limit tolerance while maintain good ratings under relevant bureaus. These credit financiers seem to be friendly at the beginning, showering you with attractive perks & incentives, but at the later stages, things started to change dramatically. Assuming the individual defaulted on the credit loans, the very same financiers will haunt like a hungry beast - Rage mode on!

Danger of Credit leverage

With respect to most credit facilities, there are certainly risks associated to using Leverage. The first reason is that Credit is not personal savings - which need not be answerable to anyone - but a type of loan being borrowed from financing institutions. This goes to show that creditors might be chasing you with heaps of lawyer letters endlessly. Another observant factor is defaults, whereby the debtor can no longer service installments at the current condition, creditors might get clearance from respective jurisdictions to seize collaterals that are pegged to the secured loans without warning. The demonstrates serious credit impairment to the borrowers and likely not to be a nice scene. Hence, it is crucial to identify the possible worse case outcomes and build a contingency plan to preserve capital.

Long v.s Short credit terms

Common individuals, who are likely not to be highly versatile in credit terminology, will tend to have invalid perceptions on loan tenors and interest payables. The aims of this topic is to help furnish more knowledge to consumers who perceived wrongly. The first issue is on the tenor, the longer the duration, the more interests are being incurred. While some experts rebutted on the lower installments being paid, comfortable for averge households, the ongoing interests can be significant over the long run and the deficit being paid at the end of term could actually help the borrower in some other aspects in a meaningful manner. That is why this blog emphasizes on the importance of weighing out pros & cons in financing.

Does it meant short term tenor is ideal? It highly depends on the credit being borrowed and purpose of leverage. If it is meant for a short home refurbishments, then no problem with shorter tenor albeit incurring a small (high) amount in interests. Car loan, on the other hand, is not recommended as the interests rates tagged are simply exorbitant, which can amount up to plenty folds in repayments - definitely a no-no to any wise individuals. Take your pick - Long or Short Credit tenor.

Financial shortfall in long run

The first point to analyze is the opportunity cost being held in the long run. Hoarding tons of credit is detrimental to one's financial health due to the interests being paid out from personal savings or monthly income. Identify your financial position first and ask on the validity of high expenses instead of lamenting on rolling credits. Is the newly upgraded private apartment draining too much expenses or the flashy cars taking serious tolls on your income? How about massive branded goods on a monthly basis eating into savings? The strength of credit can really destroy or aid you in many ways, choose your path to financial freedom wisely.