Is credit good or bad?

Before we get into bailing you out of trouble, let's explore the difference between money and credit. When either will buy those wicked sunnies or cute earrings, the difference can be blurry.

Often when people use credit, they know they're paying with money they don't have, but they fail to appreciate the interest and how long they might be nursing it for months on end.

Say you buy those earrings and you only pay the interest payable on your credit card, rather than paying the balance back by the due date... Then you might end up buying those earrings a couple of times over depending on how long you carry your balance without attending to it.

If you didn't buy it on credit, you could have bought something else with that interest... or you could have paid another debt off or maybe even kept some money aside so you were prepared for contingencies.

Can you see what we're getting at here?

Cash Doctors is no different. We provide credit, just like credit card companies or banks. At the end of the day, it's not your money, and you have to pay it back... with interest.

Interest is the price of the money used over the given period of time depending on the risk profile of the person receiving the credit, any security involved and the use of the credit.

But credit isn't all bad either. Even consumer credit. Obviously I'll say that because I run a consumer credit providing business....but that aside, access to credit will smooth out your well being and lifestyle.

If you didn't have access to credit and something came up or your budgeted poorly, then you'd have to grind it out eating rice and not paying your bills and accommodation for a few weeks until the situation improved. You wouldn't be able to buy great things when they came up or take a holiday for a few days even if you hadn't quite saved up for it.

You probably couldn't get a car or even dream of buying a house by writing out one big cheque for a few hundred grand.

Essentially in these cases you weigh up the cost of paying the price of the item, plus the much larger associated finance cost and having the item now, against not having and perhaps never having it...and you generally do the transaction.

Credit facilitates wealth building. We can borrow to enjoy the leverage of appreciating assets with greater returns than the interest paid. These returns can create more options and equity, which can be secured by credit providers to borrow even more funds and acquire more assets. In the meanwhile, our own funds, not credit, should be used for the purchase of depreciating consumer items or we'll never have the chance to build wealth.

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