32 — Sunday, August 31, 1997 -- North Shore News

Debt handied well

Lots of valid reasons for borrowing

By Dick Eldridge Contributing Writer

IN times past, the word “debt” was uttered in hushed tones. But today’s con- sumers realize that debt or “responsible bor- rowing,” as we like to call it, can be a planned financial strategy to achieve financial or ‘other goais. The key to that phrase, of - course, is “responsible” The key to successfully borrowing is to know your budget con- straints (the amount you can “safely borrow) and to carefully plan your schedule for paying oa) a debt (the payback peri-

*. If you assess your financial situation and decide that bor- rowing money can give you

~. more flexibility and freedom, then it’s probably worth it. If, on the other hand, borrowing

“ ¢.- money will result in debts that:

~.. Will-cause you undue financial “strain, you might consider another option.

~~: Some guidelines suggest:

that your debts: should” not

borrow- credit:

7AYLORIMOTIU BRAKE SPECIALISTS )

VICE ETO

card, line of credit, personai loan -—~ you're paying for the right to use someone else's money. [t's an easy poine to forget once the money is in your own hands and helping you reach your goals.

One of the most basic ways of “borrowing” money is through a credit card.

Although credit cards have made us a nation of debtors (we love convenience), strate- gic use of a credit card can actually save you mionev. It’s also a great way of establishing credit.

If you pay your full bill on time, you can avoid interest charges and essentially get an interest-free loan from the time of purchase, to the time the payment is received (on time). If you extend this fur- ther and shop strategicaliy, buying on sales and in butk, you can use borrowing to improve your finances.

If you find you often use your credit card’s . advance feature, you might instead consider establishing a personal line of credit, or LOC

authorized lending limit. Let’s say you set up a LOC of $10,090 — you can use that amount any time and you pay no interest until you tap into the credit loan.

Interest rates are generally

lower than other: types of :: loans, too. Once you start — writing cheques on that loan," .§ : requires monthly pay- ~ ments. But unlike some other. . “loans, you can repay as much” | # :as-you want, any time, with- ‘out penalty. ne a

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cash

An LOC is basically a pre-B

north shore news

BUSINESS

With decreasing job securi- ty, a LOC could be a “back- up” in case of some unexpect- ed financial misfortune in the short term. The trick is to remember that it is a loan, and not a bottomless chequing account.

If the idea of a LOC as a loan back-up appeals to you, bur you are nervous about borrowing, you can always use your home or mortgage as security.

Borrowing can give value back in terms of well-being or savings. :

Sometimes it just doesn’t make sense to save over a long period to achieve a certain financial or personal goal.

It may be more important to you, for example, to get an education right away and finance it with a student loan than to save for years or to work while you’re attending

A

school.

Borrowing could also help you save money by increasing your bargaining position.

Naturally, your bargaining power goes down when you are most in need. Why not use your bargaining power when it is greatest?

For example, you know you need a new home appli- ance and have soine of the money saved. The appliance goes on sale at 30% off. What can you do if you don’t have all the cash? You can purchase the appliance with a credit card of line of credit. If the savings outweigh the accumu- lated interest you'll owe on your credit, you’ve made yourself a good deal.

You can aiso apply borrow- ing to your own. savings accounts,

For example, if you have an account with a minimum

balance, or a tiered account where a certain balance offers greater interest, you can have that account tied to a credit line to be sure the balance doesn’t drop.

Staving at a certain balance might also save you some ser- vice charges.

There are many valid re: sons for borrowing money

Remember that whatever you purchase with borrowed money must be worth the cost of borrowing as well.

Planned responsibly, bor- ~.

rowing can help you save

money, save time, and bring <

you personal satisfaction.

Dick Eldridge is Vice- Credit Services, North Shore Credit Union. For

President,

more information on borrow- ing, contact one of the Credit

Untion’s teleconsultants at 713-—

3000.

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