Why do we need credit?
In today's society, a credit trend has clearly emerged: people are more willing to take on debt and often for far greater amounts. Salary and price increases are part of the answer, as well as greater availability of credit.
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Unforeseen expenses |
Unforeseen situations may require unplanned purchases: for example, car repairs that just won't wait or a speeding ticket you've got to pay.
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Big ticket items |
People may also use credit to purchase big-ticket items like a car or a house right away.
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College degree or additional training |
Since better training frequently leads to a better-paying job, this expense is an investment in human capital.
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Some people borrow and reinvest the money (when they believe the return Return: Amount of interest or dividends received from an investment in a given period of time.
on investment justifies the cost of the loan). This option is often used to contribute to an RRSP RRSP: (Registered Retirement Savings Plan) Savings method that allows you to put savings in tax-sheltered investments during your active life to supplement your income when you retire. Your RRSP savings will not be taxed until you withdraw them. in order
to receive larger income tax returns or even to purchase a home using the Home Buyers' Plan (HBP).
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Unexpected opportunities |
When opportunity knocks, if you don't have enough money or can't use your savings, credit could be the answer. |
To consolidate your debts |
Some people borrow to pay off all their debts. They take out a single loan Loan: Amount of money lent for a predetermined period of time. , often at a
better interest rate, and only have 1 monthly payment to make.
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Reserve or rent goods and services |
A credit card Credit card: Plastic card issued by a credit company (e.g., VISA) that you can use to make purchases on credit and pay for them at a later date.
is essential when you need to rent a car, reserve show tickets or even a hotel room.
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