Personal Credit and Finance
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Personal credit is the granting of loan and personal credit finance is nothing but funding such credit. Personal credit finance has a major side effect of creating personal debt.
A person is using credit when he is purchasing anything today by committing to pay for it the next day. Definitely such lending would rest upon the credit rating or simply the credit worthiness of the concerned individual.
Hence personal credit finance can be done if:
- The lender is aware of the credit history of the individual seeking to finance his credit or
- The lender is aware of employment and salary information in order to judge his credit worthiness
Method of obtaining this
- In order to obtain personal credit finance from a financial institution the respective individual must make an application. Sanction of his request would depend on his credit worthiness.
- Once the individual becomes eligible to obtain credit he is provided with an instrument of availing such credit usually by a credit card.
- The credit card holder would receive financial statements at regular intervals indicating purchases made, interest charged, minimum payment amount due and the payment due date.
As mentioned earlier personal credit financing leads to debt creation.
10 ways to prevent escalating debt
- Instead of accumulating debt it would be better to stop using credit cards until the debt burden is light.
- Copies of the credit report need to be obtained to determine the areas that need to be worked upon.
- The incorrect information if any in the credit report should be erased.
- Past dues if any should be cleared since they constitute 35%of the credit score.
- In the credit repairing status, no other credit should be made.
- However bad the credit situation may be, they should not be closed since it could adversely affect the credit position in future.
- The creditors should be contacted and the current situation explained so that they could offer a suggestion to escape from the present predicament. Low monthly repayments could solve the problem.
- Debt should be cleared off to improve the current credit situation.
- For a definite solution the consumer credit counseling facility should be availed.
- One should be patient since the accumulated debt would not get erased overnight but would require some time.
Working of personal credit finance
- After the credit card is issued the holder can finance his personal credit by purchasing from merchants who accept the card up to a predetermined credit limit.
- The electronic verification system allows the merchant to judge the validity of the card.
- Each month the credit card provider charges an interest irrespective of whether any purchase has been made or not.