In day to day life, we really cannot say when an exigency may spring up, forcing us to revisit and rejig our finances. Often, such instances may take our financial planning for a toss, and we must dig into our preserved savings to steer through the crisis. However, today we have a host of financial instruments to help us tide over such tough times, credit being one of the readily available ones.
As a spender, you may wonder if taking credit is right for you. In fact, turning to credit rather than ready cash can be a boon in certain situations, due to the fact that you have a time-leeway to pay it off. We bring you some situations when you may need credit.
Using only cash to travel is not only inconvenient, but it also poses a security risk, you become more prone to thefts and incidents. Moreover, the travel industry is more open to receiving credit cards, especially rental car agencies and hotels which generally take some sort of a protection fee as a safety net. Using a line of credit helps you by not trapping your free cash in transactions that you will avail months from now. A credit card however, may levy exchange rate charges. Get credit card that does not charge foreign transaction fees, if you travel internationally, and offers travel specific perks. Or avail aa line of credit like the one offered by MoneyTap. It approves a higher amount of credit for you but charges you only for what you use.
While it is a good practice to keep aside three to six months expenses aside for emergencies, it may always not be possible. In such situations, when faced by a medical emergency, availing credit through credit cards or loans is the next-best option. Due to their popularity, credit cards are widely accepted even by hospitals and allow for immediate use. Loans may take time and require heavy documentation.
Preparing For a Loan
One of the best ways to build a good credit score is to spend on a credit card and pay it back judiciously. For example, if you are seeking a personal loan, your credit worthiness is critical for getting the loan approved. Your credit score is indicative of how you manage your credit. Building up that score is difficult without having a credit instrument at hand and infrequent use. However, if you decide to avail credit for this purpose, keep a close tab on your expenses and payments so as to keep your payment history positive. Responsibly using a credit card is a good enough indication of creditworthiness.
When Security is a Concern
Credit cards are generally, more secure that debit cards. Online shopping is one such area that is catching on, and where credit cards are especially used for large expenses. You can never be sure about the security levels of an e-tailer network. Hence using your debit card can directly expose your bank information. Another aspect is, when the online retailer delivers the product at your doorstep, you may receive it as a damaged piece, or never reach you on time, making you return it. Using a credit cardfor therefore cushions you for such delayed receipts, by not blocking in your cash—you can ask your retailers or bank to withhold the payment till the delivery happens safe and sound.
For Important Life Milestones
Getting higher education, getting married, and buying a house are important life events that are often expensive. While you may save for such events over the long term, it may not cover the entire gamut of expenses. You can turn to different credit options such as an education loan, a home loan or a personal loan. Evaluate the interest rates and your future funds inflow. Make sure you take credit within your means, especially for such long term engagements.
The key to using credit for such situations is to pay it off on time. Whether it is a loan, a credit card, or a line of credit, you can choose as per your needs. There are times when a personal line of credit as offered by MoneyTap works better than other forms of credit. A unique advantage of having a personal credit line is that once you have it approved, you do not need to go through the drill again. You can keep it and use it whenever you need. Furthermore, you do not need to pay any interest if you don’t use it. Read more about MoneyTap features here .