Credit Rating

What are the Pros and Cons of Credit Type of Debt?

There are two types of debt that can exist in an individual or a businesses’ financials. One type of debt can exist or both can exist and co-exist together. Having fast cash loans or credit or even both has its own advantages and disadvantages. Sharing a few of the pros and cons of having credit.

Pros:Image result for pros credit type debt

  • Having Credit allows the credit hold the benefit of purchasing goods and/or services now and being able to pay for it tomorrow. This allows the credit holder to delay payments to the seller or service provider.
  • Credit allows a credit holder the benefit of purchasing goods or services that are priced more than the current amount of cash that he or she may hold. In a way, it extends the actual purchasing power a credit holder may have.
  • Credit lines can be used as an evaluation of an individual’s credit score. This can help in applying and negotiating for a low interest loans as a borrower with good credit standing.

Cons:Image result for pros credit type debt

  • Credit comes with an actual credit line which may become a disadvantage especially when a card holder has the habit of maxing out the credit line that has been granted. It slowly becomes a burden as most credit lines granted are just enough for a credit holder to pay the minimum when maxed out.
  • Late payments can eventually damage a credit score of a business or an individual. Applying too much credit to what is reasonable can cause problems in paying the dues in the future.
  • Credit repayment contains interest and other finance charges that come along with paying on a future date. The purchase of the goods and services tend to be paid with an extra cost brought about by interest rates and finance charges.

Generally, a guideline you can follow on credit management would be using up credit up to 10 to 15 percent of your current income. Try maintaining spending at this level unless there is a need to go beyond. This will help in managing credit payments and will not take up much of your income. Other expenses can still be paid without burden.

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