In a perfect world, you would never need to borrow money. Still, most people will eventually need a loan of some kind. Credit, if used wisely, can be used to your advantage. The key is to know your borrowing options and avoid borrowing more than you need.
- There are lots of reasons to borrow money, such as paying for education, buying a house or car, paying for major purchases over time, making investments or using a line of credit or credit card when your cash flow is low.
- Borrowing money can be a useful tool for building your assets. For example, education can help you to get a better paying job, while buying a house gives you a place to live and a valuable asset. However, borrowing to buy consumer goods can become a major drain on your finances if you have to pay a high rate of interest.
- Before applying for a loan or credit card, shop around for the best interest rates and payment terms. Research now could save you a lot of money later.
- Read the fine print on your loan or credit card agreement before you sign it! Knowing the terms and conditions in advance could save you a lot of money and grief later on.
- Beware of payday loans, which are small loans that a borrower usually is required to pay back on or before his or her next payday (whether that payday is from a job or from some other income source, like a pension). These loans are one of the most expensive ways for a consumer to borrow money.
- Credit agencies keep track of your credit history - how much you have borrowed in the past and whether you have paid it back. If you have ever taken out a loan, used a credit card, signed up for utilities, such as hydro, water or cable television, you will have a credit history. Your credit history is used by banks and businesses to decide whether or not to lend you money and how much interest to charge.
- If you're having trouble getting credit or are suddenly billed for things you did not purchase, you can check your credit history to see if a mistake has been made.
- Know how much you owe and how much interest you are paying.
- Borrow money with care and always have a plan for paying back the money that you owe.
Helpful Web Sites:
- Use Industry Canada's Cost of Borrowing Calculator to see just how much borrowing money is going to cost you.
- The Financial Guide for Post-Secondary Students can help you to determine what type of credit is best for you.
- Get the facts on payday loans, including potential interest rates, from Financial Consumer Agency of Canada.
- Know the warning signs of debt from Canada's Office of Consumer Affairs before you get yourself in too deep to repay.
- If you are struggling with your credit, get to know more about hiring a credit counselling agency with help from the Financial Consumer Agency of Canada.
- Understand your credit report with tips from the Financial Consumer Agency of Canada.
- There are two main credit reporting agencies in Canada: Equifax Canada Inc. and TransUnion Canada. These private agencies collect information about borrowers from other credit grantors and will sell you a report on your credit status.