(MP) Having credit can be a wonderful thing. Plastic cards enable you to buy items now without cash and pay for them at a later date. Having good financing helps you buy homes, cars and other items in effect on lay away. Why? Because credit is merely a loan made to you by a financial institution such as a bank (with interest) and they expect to be paid back in full.
Banks have figured out long ago that the average consumer, when saddled with high interest rates and large available balances, stand little chance of ever reducing the principle amount of their loan (debt). Instead of limiting the amount of debt per customer, banks keep raising the available limits on your existing cards, thus plunging you further into debt under the disguise of convenience.
What is credit?
Credit is loan, an arrangement for a deferred payment of that loan or advance (purchase). In other words, when one party (bank) gives another party (You) money and you do not reimburse the first party immediately you generate a consumer debt. Consumer debt can be defined as ‘money, goods or services provided to an individual in lieu of payment.’ Common forms of consumer financing include credit cards, store cards, motor (auto) finance, personal loans (installment loans), consumer lines of finance, retail loans (retail installment loans) and mortgages.
Using credit for wrong reasons
Nothing wrong with having available financing: We’re able to buy homes, cars and other items without carrying cash. The problem with finance is we tend to use it for all the wrong reasons. There’s lots of advice online about the wrong ways to use credit and they’re right for those comfortable staying middle class. But, I always tell MoneyPacers that using loans for anything other than making profit and then paying back the loan in full quickly is for financial slaves. We only carry debt when borrowed money is busy making profits.
Use your available finance make money. (Period). Consider this, let’s say you have $25,000 total on five plastic cards. You’re looking into real estate investments and find a property that costs $175K. You use $10,000 as down payment and $15,000 to do fix-up. You then sell the property for $235,000 making a grand total of $60,000 in profit. Who would you say is getting the most out of their plastic cards, the guy or gal who uses them to buy cars, clothes and vacations or you who use them to make money.
How should you use advances
I know it’s convenient to pull out your card at every cash register, but remember you’ll be paying off Mr. banker for a long time with interest. Owning personal property under your personal name is for the middle class. This is one way they keep you in the middle always owing never owning anything until your old and grey. Remember until you pay off your home or automobile you don’t own anything the bank does. Think about it — stop paying on your loans and see how quickly they take it back your property through either repossession or foreclosure.
Look, usually only subscribers get the following advice. I’ll give you a nugget but for more detailed information you’ll have to sign-up for “Follow the Money.” If you keep reading MoneyPacers your days of being a slave to the banks ends. I’ll tell you this much: I always recommend leasing, but even if you buy a car under your business it will allow for certain tax write-offs such as maintenance, gas, yearly mileage and depreciation. You should start a corporation or non-profit soon (make sure you’re doing legit business) and put your cars or homes under your business name. This way you are able to exercise write-offs of taxes by depreciation and other expenses related to owning these items. And by the time you pay off these loans — your car or home will have literally paid for themselves. Business owners do this every year. As a personal auto or home owner indebted to a loan — you’re a mouse on the financial wheel going nowhere fast. This ends today!