Reflection: Avoid Misusing Credit

misusing credit

Recently, a Virgo Philosophy staff member recounted a disturbing story. A neighbor was experiencing the displeasure of foreclosure on their home. The house was an heirloom and generations lived in it since the late ’60s. Incidentally, the primary homeowner fell ill so the title deed came to be in a family member’s name. This member didn’t live in the house but had a love for the “finer things” in life, i.e. fast cars and luxurious homes. So, they took a loan with the house as collateral. They lagged on their payments to the bank and now the bank is trying to sell the home. It is not hard to imagine the anguish and accompanying despair of this family. We need to make due diligence to avoid such scenarios.

Let this story highlight the dangers of misusing credit. Protect multi-generational homes and escape the dangers of homelessness by remembering these five tips  on utilizing credit and avoiding its downside.

Let Credit Be a Last Resort 

Your ability to access credit doesn’t mean you should indulge in it. Use credit for long-term investments like buying a home. For demands of a smaller nature, use cash upfront or debit cards.

Determine Your Limit on Credit

You need $300, 000 to buy your house, please keep this as a limit; don’t go for a loan of $500,000.

If you don’t adhere to this you’re a candidate for the dangers of misusing credit. Always keep in mind a loan is not a gift, it incurs interest.

Pay Attention to the Fine Print

Read and scrutinize, read and digest, read and ponder. Surprisingly a large number of people do not read the fine details. Think about it, how do you put pen to paper and seal a contract with your signature without reading it?

Legal documentation on borrowing loans is binding. Please take your time to understand the full details on the paperwork then sign it.

Make it Your Mandate to Pay the Money with Interest

As you sign the paperwork make sure you can adhere to all the requirements, more so the interest. You need to remember the longer you take to pay back, the more money accrues against your loan.

As you follow this tip, remember it cuts back on the dangers of misusing credit.

Pay on Time

Pay using the stipulated installments; this way you avoid falling back on payments. Also, you’ll avoid repossession and legal battles in the event of lack of payment. Keep in the mind the above story on the dangers of misusing credit. Make it your goal to respect the designated amount and time on your loan.

Advertisements

Leave a Reply

Your email address will not be published.