How Credit and Debt impact your Finances

 

 

Have you ever used a credit card and thought, "I'll just pay this off later"? That’s credit in action, and while it can be helpful, it can also lead to financial issues.

Let’s go through the basics.

Credit is your ability to borrow money so you can buy something now and pay for it later. Examples are credit cards, car loans, and mortgages. Credit helps you afford important things, even if you don’t have all the money upfront.

But there’s a catch.

Debt is the amount of money you owe. When you use credit, you add to your total debt. interest must be paid on your debt, which gets added to the total you owe.

Debt has to be paid back. If your debt grows, your monthly payment also grow, which quickly eats into your budget.

Understanding how to manage credit and debt is vital. When used responsibly, they help achieve major life goals, but if you’re not on top of it, they can quickly lead to financial problems.

As always, we’re here to answer any questions you may have.