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Running head: LOANS AND CREDIT CARDS 1

Loans and Credit Cards

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LOANS AND CREDIT CARDS 2

Loans and Credit Cards

Loans and credit cards have become popular means for survival for people who believe

that they cannot survive without borrowing money from financial institutions. It is agreeable that

loans help people to manage emergencies and invest in projects that require a lot of money.

Moreover, loans and credit cards enable people to get easy and quick money for various reasons.

However, loans and credit cards are not necessary and people who abstain from these services

avoid extra expenses and disappointments associated with being in debt.

The money borrowed through loans and credit cards is usually repaid with interest.

Sometimes the interest charged on these debts exceeds the benefits of borrowing money from

financial institutions. In addition, the high interest charged on credit cards and loans debts may

sometimes be unreasonable and unmanageable. Failure to repay the loans and interest may attract

further penalties including additional fines. Some credit card companies provide an interest-free

period within which a borrower will not be charged interest for using the facility (Emekter, Tu,

Jirasakuldech, & Lu, 2015). However, this period is usually short and does not have a monetary

benefit to the user. In addition, the high rate of inflation and economic instability may force

financial institutions to adjust their interest rates compelling borrowers to pay higher fees for

using credit cards and loans. People who abstain from using credit cards and loans do not have to

worry about being in debt and incurring unnecessary expenses.

Secondly, living a debt free life enables people to focus on their lives and careers. Having

a loan is stressful and failing to pay one gives people depression and other health risks. There are

numerous disappointments associated with knowing that an individual owes institutions money

(Bhutta & Keys, 2016). Sometimes, uncertainties happen and render people jobless or limit their

sources of income. During unpredictable situations, people may fail to repay their loans on time.

LOANS AND CREDIT CARDS 3

Sometimes people may not be in positions of repaying their loans and this automatically attracts

heavy penalties. The fear of being harassed by loans officers or property being repossessed by

financial institutions as a result of failure to repay a loan makes people stressed. People cannot

concentrate on their daily activities if they do not have the peace of mind. Abstaining from loans

and credit cards is the best way of managing stress and disappointment brought by carrying loads

of debts.

On a positive note, loans and credit cards may be useful in situations such as emergencies

or when a person is supposed to raise a lot of money for financing huge projects. It is not easy to

save money and keep it idle for use during emergencies and that is why loans and credit cards are

appropriate services (McAndrews, Sarkar, & Wang, 2017). However, people who take loans and

use credit cards should have effective and efficient financial management skills to avoid making

impulse or unnecessary spending. It is wrong to live lifestyles fully financed by loans and credit

cards. People should learn to save and control their spending habits so that they can minimize the

need for loans.

Everybody wants to live a stress and disappointment-free lifestyle. Having a loan is an

unnecessary burden since it makes people worry a lot about repaying the debt. The high interest

charged on the money borrowed through loans and credit cards is an unnecessary expense that

should be avoided. People should learn to save money for various purposes instead of wasting it

and rushing to take loans or use credit cards when they have emergencies. Individuals who

abstain from loans and credit cards live simple, stress-free and affordable lives.

LOANS AND CREDIT CARDS 4

References

Bhutta, N., & Keys, B. J. (2016). Interest rates and equity extraction during the housing

boom. American Economic Review, 106(7), 1742-74.

Emekter, R., Tu, Y., Jirasakuldech, B., & Lu, M. (2015). Evaluating credit risk and loan

performance in online Peer-to-Peer (P2P) lending. Applied Economics, 47(1), 54-70.

McAndrews, J., Sarkar, A., & Wang, Z. (2017). The effect of the term auction facility on the

London interbank offered rate. Journal of Banking & Finance, 83, 135-152.

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