Credit plays an important part in the financial
world. Navy personnel should use it wisely and
carefully, heeding the following principles:
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Use credit for those necessary goods that
you cannot afford with one or two
paychecks.
Use credit mainly for goods that have a
useful life longer than the time needed to
pay for them.
Make as large a down payment as possible.
This reduces the total amount spent
because of interest charges.
Know what your income will be. Set a
spending limit equal to the smallest
paycheck received to be sure of having
enough money to meet the payment when
due.
Don’t buy another item on credit just
because you have finished paying for one.
Avoid the temptation to use credit for
splurging. For example, buying too much
on credit at Christmas becomes a shock in
January when you receive the bills.
Check with consumer affairs offices about
local credit regulations. For example, some
states allow up to 3 days to change your
mind on a credit purchase or a loan
received.
You should remind your people that, when
using credit, they should remember the follow-
ing basic principles:
Credit costs money, but many credit plans
exist. Some plans are much less expensive
than others. As people shop for the best
bargain when buying a car or furniture,
they should shop for the best bargain in
credit.
Consider carefully before borrowing from
finance companies. These companies often
charge higher rates on loans.
The faster a person pays off a debt, the
less interest charges he or she will pay.
Use credit only for unforseen emergencies
and for higher-cost purchases, such as
furniture, cars, or houses.
While buying on credit has certain advantages,
personnel also need to recognize some problems
involved in using credit. The following are some
of the
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problems you may encounter:
Credit customers may overbuy.
Credit customers may buy at the wrong
time or place.
Credit prices may be higher than cash
prices.
Credit ties up future income.
Payments must be made on time.
Because of the addition of interest charges
to the price, the purchase costs more.
CREDIT RATING. —Most people find it
advantageous to establish a good credit rating.
Some people object to buying anything on credit
and insist on paying for everything in cash. They
save until they have the cash to make a major
purchase, and they often do get better buys for
cash. However, a good credit rating is like money
in the bank. When people have a good credit
rating, it means that they pay their bills on time.
Navy personnel usually have a good credit reputa-
tion and should have no problem getting a loan
or credit when needed. A good credit rating can
be priceless in an emergency such as a medical
crisis, fire, or death in the family.
You can establish a good credit rating by
paying for time purchases according to the
purchase agreement. Time purchases include items
such as furniture or cars and items bought on
credit card accounts. You can also establish credit
by repaying a loan from a bank or a credit union
according to the loan agreement. Making these
payments according to-their agreements means
that you pay the amount agreed upon by a certain
date. You can then use these companies, banks,
or credit unions as credit references if you apply
for credit at any future time.
COST OF CREDIT. —Have you ever rented
a motorcycle or sailboat? You always know in
advance that it will cost you so much an hour or
day. The rent or cost of using the bike or boat
has its base on length of use.
The rent paid for using borrowed money or
credit is interest. You may sometimes have
difficulty figuring interest. Some lenders and
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