What exactly is the meaning of credit?

Most banking and financing institutions from list of licensed lenders in singapore offer different kinds of credit and loan products. From credit cards, signature loans, to mortgage and business loan, consumers are becoming more aware in the world of credit. However, some people still lack of financial information and discipline before they can get any credit from the banks.

The first thing that you need to know is what exactly the meaning of credit. Credit means that you are getting a service or cash grant to rent for your own purpose. You are often bound with a contract or agreement to repay in future as agreed with a money lender or service provider. Credit exists in different forms like loan, mortgage, signature loan, or credit card.

Each banking institutions or lending companies will first check a person’s credit history, before they will consider giving a credit. If you have defaulted on credit or loan before or have bad credit report you will find it almost difficult to get credit any time you apply for it.Credit report is a compilation of your credit history, past financial transactions and personal information possible. This report is usually compiled by accredited agencies known as credit reporting agency.Credit reporting agencies are organizations that help credit card companies, loan companies, banks, and departmental stores in the country to ascertain the credit worthiness of their would be clients.Once they have detail information from these sources, they give it to any organizations in need of it when requested. Though they keep on file information concerning you and your credit, they don’t make final judgments as to your credit worthiness. The decision is up to the credit card companies or any lender which you are dealing with.

The credit score is very important in any financial institution if you intend making any loan in the future. That’s why it’s good you know what exactly your score is, understand its meaning and learn how you can improve it if it’s not good enough.Make sure that you study the terms of any of the loan products that you pick very well to avoid risking your credit rating. So make sure you thoroughly look over the bank’s terms and conditions of each specific services before applying for your next loan.

Determine why you borrow money

There will come a time that you will run out of a fund to pay all your financial obligations. It may be from a lot of reason why you are left with insufficient funds and you may need a plan on how you can fulfill all your financial obligations in time.
Borrowing money can be your perfect solution. But before you head to the nearest money lender, you still need to determine all the information about borrowing money.
First, you need to know your limit before borrowing a money. Borrowing money without knowing the limit of your cash flow could be very dangerous. Before you borrow money, try to look into the source of your income before deciding on a certain amount to borrow. It will not be a good idea to borrow money that is higher than what you earn as salary or regular income. Your borrowing should be a function of what you earn as income.
Make sure you have a regular cash flow. Most people borrow money because they are hoping that one way or the other, money will come for them to pay back. It’s not really a bad idea to have such hope; it only becomes a bad move when you borrow without the certainty of your cash flow. If the source of your repayment is not certain, try as much as possible to give it a second thought. Alternatively, find out other ways of calming the situation down pending when you will be certain of your source of repayment and its consistency.
Borrow money because of your needs not because of what you want. Borrowing money without a valid reason is like building a house without the necessary materials needed to make it become a real home. Before you borrow money, make sure you have considered the reason why you need such money and the purpose which the money will serve. Do not make the mistake of borrowing because you want something that you don’t really need. Always remember that the money you borrow is to fulfill your other financial obligations and not to fulfill your spending habits.

Basic principles of borrowing money

One of the basic principles in borrowing money is that the interest and other costs of obtaining the loan are less than the value that is created by borrowing the money. As an example, if one borrows money at 4% and creates a 7% return, all else being equal, then there is a 3% profit return on that investment. The goal is to get the greatest rate of return with the lowest cost so profits are maximized.

Assets such as houses and businesses can be used as collateral to secure a loan. One can also use a consumer asset such as a car or a credit line. But when should one borrow and when should it be paid? Or what is the true purpose of why you borrow money?

There are a lot of factors on how you will determine of why you borrow money. Money should be borrowed against assets that produce an income. Commercial and investment real estate and other business operations produce income since the asset is used in business to provide a valuable service to another for money. This income can then be used to service the debt owed on the asset. Personal assets such as primary residences, cars, and personal lines of credit do not produce income.

You can also borrow money against assets that would, over the long-term, appreciate in value. Even if the income for the use of the asset did not provide enough income to pay off the debt, the eventual sale of the asset would be at a higher value in the future so the debt could be retired upon sale. Commercial and investment real estate have the potential for appreciation as well as businesses as they grow in value through expansion. Primary residences may or may not appreciate in value, depending on the market and holding period. Consumable assets such as cars, boats, and personal credit lines do not appreciate but decline in value.

When you are determining whether to borrow or not, you will really have to know the purpose of borrowing. To borrow the money at the lowest net cost and generate the greatest value possible with the proceeds is the wisest thing to do.

Is borrowing money the right decision?

Every time I need a money and doesn’t have enough funds, I always thought of borrowing money. Borrowing money can be the best solution for people who run out of funds but you still need to consider if borrowing is the right decision. Remember that borrowing money means that you have a commitment to repay it back within the given terms and conditions. You need to know how borrowing would affect your overall finances.

You need to ask yourself first if you really need to purchase something.  Most of the time, the things that seem necessary really aren’t. You can actually delay or postpone the purchases until you have enough money to buy the item. Doing the laundry yourself might help you save much money for you. If it is just for recreational activities such as jet skis or long boards, you can really let it go by for now and save the money, because they are less necessary purchases. In fact, it will help you save up more money than expected because you will be more motivated to make the purchases.

Ask yourself if you will meet the monthly payments. This is probably the most important question because this will affect your ability to do things in the future. It may mean you need to take fewer vacations because you don’t have the ability to save much money. Additionally, you may be very tight with that budget that it is making it difficult for you to do anything. You may come to regret the purchase, and wish that you could turn back the time to change your decision.

Then ask yourself how you can pay and what would happen if you can’t pay on time.  When taking out a cash loan you should focus and have a plan for repaying the loan as quickly as possible. It is essential to realize that building true wealth is more difficult when you are regularly paying interest to others. You should also think about the long-term effects of losing your job is something that is possible to happen. This means that there will be extra pressure on your part to find a new job quickly because any delayed or skipped payments will affect your credit score. Stay focus on how you can repay as quickly as possible and you’ll be able to reach your financial goals.

The benefits of using secured and unsecured credit cards

Nowadays, people are getting accustomed to using card whenever they make a purchase. Shopping and paying without cash has been a normal practice today. Credits card is one of the biggest financing product in the world of consumers. There are so many credit card products that one can use in purchasing and the most popular are the secured credit card and unsecured credit card.

Secured credit card is similar to a prepaid credit card since the funds you are using are actually yours and not the issuer of the credit card. Generally, people who apply for secured credit card or prepaid credit card are people with poor credit or unemployed. Prepaid Credit Card spending limit is the amount of money you loaded to the card. There are no interest or finance charges on a prepaid card. With this kind of card, your credit line could be from 50% to 100% of your deposit depending on the institution giving you the secured credit. Closing unnecessary accounts and consolidating your bills to make payments more manageable could be an advantage financially. By not applying for too much credit within a short period of time is another factor that will help in rebuilding your credit rating. Additionally, even though secured credit is like prepaid cards, they do have certain fees attached. Benefits are similar to that of an unsecured credit card, such as usually being paid interest on your balance in the bank, using Automated Teller Machines to make deposits, withdrawals, and making purchases at participating merchants.

While the unsecured Credit Cards are issued to individuals with good to excellent credit rating. Credit ratings depend on certain criteria, such as one’s ability to repay loans. These criteria include payment history, employment history, and financial stability. Individuals with excellent credit will most likely receive a lower interest rate. A major factor in maintaining excellent credit is making your loan payments on time thus avoiding late fee penalties. Making payments on time will strengthen your credit rating. Unsecured credit cards have numerous advantages such as low-interest rates, high credit limit, business name options, and no annual fees. Closing unnecessary accounts and consolidating your bills to make payments more manageable could be an advantage financially. By not applying for too much credit within a short period of time is another factor that will help in maintaining a good credit rating.