The True Cost Of Credit

Credit has become a vital part of society and, at some point in our lives, we will need some form of credit in order to achieve our goals. 

Why is credit so important?

Well, if you are planning to purchase a house unless you have a large bank account, you will require credit to be able to acquire your house. Even the wealthy would rather use credit to make large purchases than spend their cash reserves.

The sad part is that there is no financial education being taught and as such, we have a segment of society that struggles with financial literacy.

The wealthy understand how to leverage credit to grow their wealth and increase their net-worth while the rest of society struggles. We are told that credit is bad and we should never use credit cards, etc. Unfortunately, if you plan on participating in the economy and also improve your lifestyle, you must be financially savvy when it comes to credit.

Now, there is a cost of credit and if you abuse credit, there will be a price to pay. In addition, not all credit is the same. Let's take the example of an individual who due to personal financial difficulties, takes out a payday loan.

These payday loans are designed to be emergency loans until your next paycheck, unfortunately, these payday loan lenders are not federally monitored or regulated and as such charge clients exorbitant interest rates. Because of the borrower's credit rating, these loans are very risky and expensive.

A $300 payday loan repaid in a month could cost the borrower $13.99 which is an APR of 57%.

There have been cases of borrowers paying over 300% in interest to these payday loan lenders, don't be a victim.

 

Here Are Alternatives To Payday Loans:

1. Get a line of credit from your local bank or credit union.
2. Ask your employer for a paycheck advance.
3. Ask your family or friends to lend you money (be careful about this one) :)
4. Apply for a regular small loan.
5. Negotiate with your creditor for more time to pay your bill.
6. Use a cash advance on your credit card.