Used sensibly credit can be beneficial. When used irresponsibly it can certainly lead to the downfall of individuals, and eventually society if enough members proceed to use credit unwisely. The current downturn in the economic climate is directly due to lenders lending in an irresponsible manner, and consumers taking advantage of this, often in an uneducated way which has left them confused and angry as a result.
The magic word ‘credit’ has different meanings for different types of consumers. To some having credit available means they can spend way beyond their means. If they are issued plenty of credit they will use it, regardless of whether they can see any way of making a payment plan to rid themselves of debt.
For others the word credit means they can carry less cash, but still pay for items. It means they are insured if their card is stolen, whereas if they carried cash it would probably be lost forever. It also means items purchased may be insured and that they can opt to have a balance transfer card and consolidate their debt payments at a rate of 0% if they shop wisely for a card.
For this type of consumer credit is a healthy way of making financial transactions easier to perform. But for the first type of consumer who imagines credit is an easy way to get what they can’t afford, their financial futures look less rosy.
We can see from the way banks have lent money to people who can’t pay it back that this has had a domino effect. Banks now have less money, businesses are going under because they can’t afford to pay staff, and people can’t get mortgages or loans easily.
Banks are having to cut losses and be bailed out by one another. As a result interest rates have dropped considerably for the more financially savvy customers, who have been attempting to save, so that customers who have borrowed too much can cope.
When society experiences a financial downfall the whole of the economy is affected. It’s not just banks and business’s which are dragged down, but the lives of individuals as a knock on effect in the current climate.
Bad lenders and poor borrowers need to learn from what is happening to the financial world at present. The houses people have supposedly purchased using credit, do not really belong to them, as many of them are discovering when they become homeless.
Whether the responsibility for this should be shared is debatable. After all, if you jump in a lake and accidentally drown, are you entirely to blame or should the person who knowingly gave you directions and moved out of the way shoulder some of it.
Perhaps lenders need to become more wary of issuing loans, while potential borrowers need to learn not to attempt to live beyond their means.
The real culprit, or reason, for the downfall of society in this manner is then, a mixture of ignorance and irresponsibility, rather than a piece of plastic or a financial agreement. Credit itself is not designed to be dangerous. However, in the wrong hands it may seem to be so.