November 30, 2014
Buying on Credit
In a world that is heavily reliant on economics and personal finance on a global scale, it is necessary for people to have the availability of credit. Both individuals and businesses use credit to facilitate purchases that they would not have been able to afford in cash. Having access to credit can be either an advantage or a disadvantage, depending on whose perspective you look at it from. The ease that is currently experienced with accessing credit is proof that it is a necessary tool for people to be able to progress in life. According to the definition given by the Webster’s dictionary, credit is transferring goods and services in confidence. with an agreement to pay at a later date. Credit transactions began in colonial times. when it was only the privileged people who were able to access credit. Farmers were the main ones who needed credit on a regular basis to help with their livestock. There were no charges for accessing credit in those times, instead, the cost was directly added to the price of the loan products (Omar et al.). Consumers who make credit, and not cash purchases are major players in the economy. The ease of accessing credit also comes with the responsibility of being able to repay it on time and in full. Many people are able to access credit, but not all are able to repay their debt when it falls due. To this end, many are indebted to the lending institutions that afforded them the privilege of accessing the loan.
Even the government has loans and if they are not paid, will also run into problems. The interest on a loan is the major contender in the problems that are faced by borrowers. Many believe that after they have accessed credit, the prompt that they receive to repay the minimum balance is the only payment that they need to make. When the minimum balance is repaid, the interest continues to grow on the principal until it is also repaid. The public, government agencies, individuals and corporations are all users of credit (Roberts and Jones). In the world today, it is one of the most important methods used to facilitate growth. Credit, when it is properly used, gives us buying power for the items that are not easily afforded. Even though many abuse this finance option and end up in the “red”, not everyone will be as careless with their credit. If credit is managed properly, the ability to access it can grow and enable the people who access it to see amazing growth in their lives. With the credit reporting requirements that have been in place in the US since the fifties, it has prompted the creation of global models for other countries who wish to do the same. It was reported that if credit is not used, or made available in an the economy, then that economy will not experience the amount of growth that countries who do the opposite experience. Many countries have not yet realized the benefits of having a healthy credit relationship with others. The credit history reporting mechanisms that are available to institutions that provide loans vary, according to the type of loan, the amount and the borrower’s repayment history (Cole). With these considerations in mind, one should not have a problem getting their credit approved. Before the practices that are currently in place regarding loans, the information that was made available on a borrower’s delinquency rate, bankruptcy, etc., were the driving force behind credit approval or disapproval. This has changed drastically, as borrowers who pay on time and in full are now that force. If data is to be further translated, the countries that reported their negative credit history and caused the issuing of credit to be restricted, are now facing lower growth rates than the ones who give credit. The repayment history of borrowers, added to the responsible handling of their credit have increased the availability of credit to those people. They have seen major growth in their credit...
Cited: Brunnermeier, Markus K. 'Deciphering The Liquidity And Credit Crunch 2007–2008 '. Journal of Economic Perspectives 23.1 (2009): 77-100.
Cole, Rebel A. 'The Importance Of Relationships To The Availability Of Credit '. Journal of Banking & Finance 22.6-8 (1998): 959-977.
Durkin, Thomas A. Credit Cards: Use And Consumer Attitudes,. 1st ed. 2000. Web. 30 Nov. 2014.
Mann, Ronald J. 'Credit Cards, Consumer Credit, And Bankruptcy '. SSRN Journal n. pag.
Omar, Nor Asiah et al. 'Compulsive Buying And Credit Card Misuse Among Credit Card Holders: The Roles Of Self-Esteem, Materialism, Impulsive Buying And Budget Constraint '. Intangible Capital 10.1 (2014): n. pag.
Roberts, James A., and Eli Jones. 'Money Attitudes, Credit Card Use, And Compulsive Buying Among American College Students '. Journal of Consumer Affairs 35.2 (2001): 213-240.
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