BORROWING TIPS

Give yourself credit

Are you thinking about continuing your studies, about making your mark on the job market, going on an adventure or finally getting that car, computer or apartment? 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. It's called credit.

Although poorly managed credit can have unpleasant consequences, the right credit tools, used properly, can help bring your dreams within reach.

Who uses credit

It's becoming easier to access credit and more people are using it to pay for unforeseen expenses and on-the-spot purchases. There's 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're a student you may already have 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. This will help you build a sound credit history, which will work in your favour when you apply for other forms of financing such as a mortgage.

The Student Line of Credit is another solution that can help you cover your school expenses, and teach you some of 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. Nothing works quite as effectively as budgeting to determine the amount you can afford to borrow or put on your credit card.

Credit is not without cost

The opportunities to use credit are many and tempting, but interest charges can 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 be avoided if you pay off the full balance on your card before the due date, which is listed on your account statement.

Some valuable advice

• Use your credit card as an emergency payment tool or for big-ticket items only. Avoid using it for impulse buys.
• Don't exceed your card's credit limit and keep up with payments. Only use credit if it's the last option available to you.
• In order to maintain a high credit rating, 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 off the loan...do it: you'll save on interest expenses.
• If you can't make your payments, be proactive by letting your creditors know and by making arrangements with them.
• Be careful: using credit unwisely can be very expensive.