Living with Credit - Not on It

It is important to understand what we are doing when we borrow, and to plan the best ways to borrow for particular purposes whether it be a house purchase, buying a car, or a new kitchen.

Credit - A pint down the pub or a dangerous drug?

It can be either. Lenders - banks, building societies or credit card companies - might be no worse than pub landlords anxious to make an honest bob. But they often continue to serve drinks to customers who have had one too many.

Too many are more like your friendly neighbourhood drug dealer. They see someone who needs a bit of a lift and offer him 'introductory free credit' - '0% on your credit card'. You take it and feel fine. Then you need a bit more. This time there is a lot of interest to pay - and you are on the hook. As your total debt goes up, and the interest charges with it, you need more and more credit to stay afloat. You might go to another lender. Someone might offer to 'consolidate' your debts - at a higher rate of interest or with big 'administrative charges'.

Sooner or later you can't or won't pay any more. That's when the lender/dealer starts turning nasty. First come the threatening letters, then the phone calls and the Court summonses. Finally they send the boys - or bailiffs - round to sort you out.

A bit of an exaggeration, perhaps. But it is very easy to become dependent on credit unless you are absolutely clear about:

• why you are borrowing
• the type of loan you want
• how much it will cost you
• the detailed terms and conditions of the loan
• who you are borrowing from.