When it comes to credit agreements, there doesn’t seem to be much consensus as far as whether or not they’re a good thing or a bad thing. Honestly, that’s probably because there’s not exactly an answer to that question. After all, the reality is just a lot more nuanced than “good” or “bad.”
With that being said, I think it would be more productive to pivot the conversation to “are they worth it” instead of whether or not they’re a positive or negative thing. Now, there is some subjectivity to this new question as well, but at least we can somewhat come up with a proper answer to it.
If you’re curious about whether or not something like a consumer or private loan is worth it, make sure you stick around! That’s what I’ll be covering today, although it is worth noting that I’m looking at this from an international perspective. So, just bear in mind that you may notice some differences in bank policies between the various countries in the world.
The Credit Question
It’s pretty hard to do a deep dive on loans without first considering what credit is. At first glance, this does seem like it’s pretty easy to define, right? You’re not entirely wrong, of course – to look at a simple explanation, we can say it’s a judge of how worthy a borrower is in terms of taking out more loans. It can also refer to the actual contracts themselves between a lender and a borrower.
Those are sort of the “flip notes” versions of what it means, but there’s more under the surface. It’s pretty important to remember that it can take on that double meaning, though, so don’t forget that. In essence, think about it in terms of finances.
As far as the “borrower trustworthiness” bit, that mostly has to do with credit scores. At first glance, they may appear to be a somewhat arbitrary number, but the reality of it goes a lot deeper. They’re what most lenders use to judge whether or not they want to allow someone to borrow money for them.
What implications does that have for borrowers, then? Well, for one thing, it’s a big deal to know what your score is. If you don’t, it’s probably time to take advantage of some of the free software out there that lets you check. There are three major credit tracking companies, those being Experian, Equifax, and TransUnion. It will depend on your lender as far as which tracker that they use for their customers.
If you’re ever unsure of how that works, you can check out resources like this one, forbrukslån.no – uten sikkerhet, to see some loan options that don’t require collateral. Typically, this type does require a slightly higher credit score, since the lender is taking more of a risk on you without that collateral requirement. However, in some parts of the world like Norway, the requirements may be a bit less strict. You’ll have to inquire with the financial institutions that you’re considering.
Shifting gears to the other definition, though, we can also think of credit as the agreement itself. All that really means is that it’s the contract between the lender and the borrower that establishes important parameters such as how long the agreement will last, what the interest rate will be, and sometimes even what your monthly payment plan will look like.
Are They Worth it?
Now, as I mentioned earlier, this is a somewhat subjective question to tackle. It really depends on what you’re borrowing money for. If, in a hypothetical example, you were taking out a loan to pay for a mobile game or something silly like that, then obviously it’s not actually worth it. However, there are plenty of perfectly valid reasons to want to make a credit agreement.
Student loans, auto loans, and mortgages are the “big three” in terms of the most common ones that we see most adults have already. So, chances are you don’t really need to be told why those are worth it. Obviously, shelter and transportation are necessary parts of most people’s lives.
When it comes to private loans, though, that’s when the issue becomes a bit blurrier. After all, for some folks it’s easy to say that a private loan to pay for a wedding is worth it. For others,
though, that may not really be the case. In these instances, it falls on the consumer to make that decision for themselves.
Do you know that you’d be able to make repayments on a private loan without altering your current lifestyle or without having to pinch pennies to an extreme degree? Well, chances are it would be worthwhile for you to make that credit agreement. If you don’t feel that this is the case, though, then you may want to hold off until it’s more financially feasible for you.
Really, though, you’re going to have to be the judge of it. For the more practical projects like home renovations or something like that, sometimes it might be okay to have to adjust your lifestyle to some extent in order to properly afford it. For that, you’ll need to use your own discretion, though – are the changes you’re making going to significantly improve quality of life? If so, then you may want to proceed with the contract.
For anyone still on the fence, though, don’t worry. I understand the trepidation surrounding borrowing money like this, especially on a large scale. Don’t forget that if you’re not happy with the terms that you end up with in your contract, you can always go back at a later date to refinance the loan. Basically, there are always options to help yourself out if you feel stuck.
As long as you borrow responsibly, though, there really shouldn’t be any issues. Now that you’ve got a better idea of what credit is and how this all works, hopefully you’ll be prepared as you take out loans.