Throughout my articles, you may have understood that I did not carry consumer credit in my heart. In truth, it is because I see too many tight budgets because of the monthly credit payments that accumulate. However, well used, consumer credit can be a real valve for your budget.
Information: this article was inspired by the last infographic published by Lite Lending, from which the illustrations are taken, but is not a sponsored ticket.
When to use consumer credit?
Your budget is under control
You know your income, your expenses, you know what your safety margin is,
You will not run after money after the 20th of the month because you manage reasonably by having fun, you distribute your expenses.
You may be saving on a regular basis, and you know how much financial effort you can make for extra credit without putting a knife in your throat. In short, you are a rational, a budget addict. And in this case, that of a controlled budget, yes, credit to the consumer is possible.
Your budget is large
You may not know your budget as well as a budget junkie, but you do know what your margin is, and it is more than enough to pay the monthly credit you are considering and leave you the margin.
In general, your income is quite high, you like to have fun and the amount borrowed is quite large.
You know how to manage your money, you know your financial situation, you will have no problem paying off your loan.
You need a large amount
Purchase of durable goods such as a car, work in the house, equipment … you need a fairly large sum, but either you do not have it available or you do not want to touch your savings.
If you know that you will be able to repay your loan without your budget suffering, why not consider consumer credit? This would allow you to keep your emergency fund, to continue to make it grow a little if it is not important enough for your taste. As a reminder, I advise you to have at least 1,500 dollars aside, and ideally to have the equivalent of 3 months’ salary.
When to avoid consumer credit
This is an impulse purchase
Want to crack on a new sofa without any real use, on a crush? A bad day at work and a trip to the Balearic Islands catches your eye? A meeting with a friend to discover the Thermomix and you plan to do it 12 times free of charge?
I am not telling you that these purchases should be avoided at all costs. I’m just telling you to avoid making major purchases without thinking about it for at least 48 hours. Even a week. And that you should never, never, use a credit for an impulse purchase without knowing your debt capacity.
You have management difficulties
Either your budget is tight, or you do not know it precisely, but in any case, the end of the month is difficult and you are already struggling not to be overdrawn. In these cases, for me, credit is a bad idea. You will add a burden on an already heavy budget, and increase your stress.
Rather than resorting to credit, already make a good point on your budget (do not hesitate to ask for help), go to your bank advisor to study the solutions available to you. Believe me, he will appreciate your openness and be better disposed towards you.
You want to fill an overdraft
I already detailed it in this article, but filling an overdraft with a credit is a bad idea if you don’t know why you are overdrawn. You will treat the symptoms but not the disease. Again, do not hesitate to contact your bank advisor.
But we will remain positive: 88% of borrowers repay their credit without difficulty, perhaps because the legislation has become more protective of consumers.