Credit commitments are one of the basic financial services of our time used to cover both long-term and short-term spending, and people prefer to take out a loan and then slowly repay it than to save money and then buy the things they want. Undoubtedly, credits bring various good effects because they allow you to own things that you would have to accumulate for years, but often the credit can cause more harm than it does and in such situations you have to assess whether the benefit you get is bigger than the interest you have to pay, as well as the insecurity you get about having to pay for these loans every month or what they have.
Loans make everything more expensive
I have already spoken about this at other times, but often it happens that when people start to take a lot of credits, the goods they buy with this money remain much more expensive, because suddenly the demand for them increases, but the supply remains constant. And according to the basic principles of the economy, it means that sellers are starting to raise prices because the offer is less than demand and the product is considered rare. So here’s what happens with cars and housing, because when people take a lot of credit then they stay more expensive and demand is not true and comes directly from these many credits.
It’s better to collect
It’s much better to save money than to take credit and buy a product in this way. It is because you are feeling the real value of the money and then, for example, realize that the product you want to buy is not worth as much money, but if you bought it then the satisfaction will be much higher than if you take it credit, but in fact you have not earned this money and will have to earn it in the future. Credit makes everything easier, but it is not always a good thing, because you are borrowing from your future while borrowing money, but by using the money you use what you have done before, which is more profitable, because then you can continue to accumulate the next thing not to pay for what you bought in the past.
Short-term credits are not at all harmless
Short-term loans intended to cover unexpected expenses are usually with high interest payments, and although the total amount you pay to the creditor is lower than for long-term loans, if you do not repay the loan on time, the interest rate can quickly grow. That way, you can get into the worst trouble you did before, so before you borrow, think about how you can give it back.
Credits create bubbles?
And the last thing that should be touched is that loans and credit commitments can be blamed for the economic bubbles and crises we can see in the world economy at some time, because credit-cycle theory could be the blame for the initial bubbles and further on their correction. In those areas where too many loans are being issued and too many people are borrowing then these bubbles are also emerging, and so, for example, the most striking bubble in recent times was real estate prices, which fell by half in 2008 after the crisis and meant that they were here it was definitely too bloated.