What Is Credit?


Serious Credit Problems – Find AnswersAt New Life Debt Solutions

Credit is a loan of moneybetween a lender and a borrower– where the borroweragrees to pay back the loanplus interest according tospecified terms. In financialfield we use term lender as banks or financialinstitutions and borrower means you.There are two main types of credit – secured andunsecured.Secured credit is offered on houses (mortgages)and on big ticket items such as vehicles. With asecured loan, the borrower does not have ‘cleartitle’ (total ownership) of the purchased propertyuntil the loan is paid in full. If a borrower isunable to make the required payments in therequired manner, the lender has the right to sellthe property used to secure the loan, to recoverthe amount still owing on the loan.Unsecured credit is loans where no property hasbeen secured for the loan. The most commontype of unsecured credit is credit cards.Using Secured Credit WiselyHome MortgagesBefore you begin looking for a home – find outhow much of a mortgage you can qualify for:•How much money have you saved towards yourdown payment? 10% is usually the minimum recommended.•Work out a budget to show how much you canafford to pay for a monthly mortgage. Be realistic!If it takes two incomes to cover your plannedmortgage and there is no wiggle room – whathappens if one of you is laid off? Will you be ableto afford the basics of life and a mortgage on oneincome?• Shop around for your house mortgage – thereare many different financial institutions to workwith, including credit unions and mortgage brokers.Make sure you know the best rates and termsavailable and exactly what your credit rating is.The better your credit rating – the lower the intereston your mortgage will be, and the more likelythat you will qualify for a mortgage through oneof the main banks or credit unions.•If you do not qualify for a bank mortgage – findout why. It might be better for you to spend timeon improving your credit rating before you considerpurchasing a home.When you take out your mortgage – you will heara lot of talk from your lender about the power ofextra payments – listen very carefully, this willprobably be the best advice you will ever get froma lender. This is where not mortgaging yourself tothe limit will enable you to significantly reduce thecost of borrowing on your home, and reduce thenumber of years it will take you to pay off yourmortgage.Many people have accepted the idea that they willnever be mortgage-free – but that does not haveto be the case. Careful planning and budgeting canhelp you to become a mortgage-free home owner.Serious Credit Problems?At New Life Debt Solutions we work with peoplewho are facing serious financial stress. Often,through no fault of their own, their credit problemshave escalated to a point where they need thehelp of a Consumer Proposal and in some cases,a Bankruptcy.If you are in the Lower Mainland Area and facingserious debt problems, call us for a FreeConsultation at 604-909-2277 and for rest ofCanada you can reach us at 1-866-210-9262