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You are here: Home > Co-opme > Action plans and tips > Preparing for future: Youth and finance > Articles > The pros and cons of credit

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The pros and cons of credit

In our consumer society, almost everything is bought on credit: cars, homes, luxury items, furniture… The list is long. From a very young age, children see parents, family members and friends use credit. Credit seems to be easy to get, but it's important to take precautions before using it. That said, credit is neither good nor bad; it's all in how you use it.

There are many forms of credit with different associated costs. Understanding how specific forms of credit work and asking questions before taking a loan is still the best way to get maximum advantage and stay in control of your credit.

Things to know before choosing a form of credit

  • The interest rate, fixed or variable
  • Monthly obligations and penalties in case of non-payment
  • The total cost of the loan, capital and interest included
  • The term for reimbursement

Advantages of credit

Credit allows for the following:

  • Dealing with unanticipated expenses
  • Making big purchases
  • Investing
  • Paying for school
  • Taking advantage of business opportunities

Disadvantages of credit

  • Easy access
  • Increase in total debt
  • Obligation to repay monthly
  • Cost of credit

Borrowing decisions are important and have to be made knowing all the facts. From their first credit experiences, young people should ask questions and understand their limits so that credit doesn't become a trap.

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