What Are the Advantages and Disadvantages of Credit? Written by Shayenne Gamboa

What Are the Advantages and Disadvantages of Credit? Bankruptcy Can Help You Tackle Your Debt from Credit Mismanagement.

At some point in our lives, almost everyone uses consumer credit. Credit means buying now and paying later -- using goods and services while paying for them (or borrowing cash and repaying it in the future). Credit also means becoming indebted to someone else, usually a banking entity; you have to pay back the debt.
Credit has both advantages and disadvantages.
Advantages of credit include:
• You get to use the purchase (or enjoy the service) while you pay for it.
• You can buy things that are needed when you don't have enough money on hand to pay for them.
• Credit can be helpful in financial emergencies, such as when you have unexpected major medical costs, a death in the family, or need to replace (or have major repairs made on) appliances or automobiles.
• Credit is convenient. You do not have to carry a lot of money around with you.
• Credit helps to make expensive items easier to purchase.
• Using credit wisely helps build a good credit history, which can be important for getting credit in the future.
• You may be able to save money by taking advantage of special bargains or sales when you don't have enough money with you.
Disadvantages of credit include:
• Purchases cost more when using credit. Interest and other charges are added to the purchase price of goods and services.
• Credit ties up future income. When you use credit, you owe money that must be paid back from income you haven't yet earned. By committing to monthly credit payments, you may have to give up other things that you need in the future. It also may be more difficult to deal with unexpected events and emergencies (such as layoffs or illnesses).
• Credit can encourage overspending. You may buy more than you can pay for, and may even buy things you don't want or need.
• If poorly managed, credit can lead to major financial and liquidity problems.
When you are unable to pay back your credit debt on time, your account is sent to collections. If the creditors or collectors cannot collect from you, they may file a civil lawsuit against you to obtain a judgment from the court. This judgment will allow creditors to garnish your wages, put a lien on our property, or do a bank levy.
Bankruptcy is an option that will allow you to get rid of your unsecured debts if you are eligible. Once your bankruptcy is filed, all collections are stayed or stopped until the stay is lifted or the bankruptcy is dismissed. If your bankruptcy is approved, your listed debts are discharged and you do not have to pay them back so you can rebuild your credit. There are different types of bankruptcy so you should consult with a bankruptcy lawyer to see if bankruptcy is right for you.