BORROWING TIPS

Give yourself credit

Are you thinking about pursuing your studies, making your mark on the job market, going on an adventure or finally getting that car, computer or apartment? Congratulations! Being able to visualize your dreams is a great source of motivation and inspiration. But to make these dreams a reality, you may have to use a tool that you're not very familiar with: credit.

Although credit can have unpleasant consequences if it is poorly managed, it is comforting to note that, in other cases, it can be a powerful means to bring your dreams within reach.

Who uses credit

It is getting easier and easier to access credit and more and more people are using it to settle unforeseen expenses and make on-the-spot purchases. There is no shortage of offers from financial institutions and big-name stores, so it's a good idea to think carefully before you accept.

If you are a student, you may have already had your first experience with credit by obtaining a credit card like the Regular MasterCard. If so, it's in your best interest to use it properly and pay it off on time. That way, you can build a sound credit history, which will work in your favour when you apply for other forms of financing, such a mortgage.

The Student Line of Credit is another solution that could help you cover your school expenses, while at the same time helping you learn the ins and outs of credit.

Choose your moment Ideally, you shouldn't draw on credit unless you are sure you can repay the debt within a reasonable time. For example, if school is finishing in a few weeks and you have a job waiting, you may want to use credit to immediately pay off an expense that can't wait. In order to know the amount you can afford to borrow or put on your credit card, based on your income and expenses, nothing works quite as effectively as sound budgeting. For more information about credit, see the article Savoir utiliser le crédit at www.opc.gouv.qc.ca.

Credit is not without cost

The opportunities to use credit are many and tempting, but the interest costs can also be very steep.

The total cost of a loan purchase is determined by the amount of the item, the interest rate, and the repayment period. For example, a loan of $2,500 at a rate of 10% repaid over two years would cost $268.70 in interest, for a total of $2,768.70. On a loan of $5,000 at the same rate over the same period, the interest would be $537.39 for a total of $5,537.39.

Interest can also be charged on your credit card purchases, but can avoided if you pay off the full balance on your card before the due date, which appears on your account statement.

Some worthwhile advice

• Use your credit card as an emergency payment tool or for big-ticket items only; avoid using it for impulse purchases.
• Stay under your card's credit limit and keep up with all your purchases   Rely on credit only when it's the last option available to you.
• In order to maintain the quality of your credit record, don't write a cheque if you don't have the funds in your account to cover it.
• If you borrow money and suddenly have the funds to pay the loan back, do so – it will save you interest.
• If you can't make your payments, be proactive by letting your creditors know and making arrangements with them.
• Be careful: using credit unwisely can be very expensive