4 Ways To Leverage Credit To Build Wealth
If credit is used in a constructive way, it can be an invaluable tool in building wealth creation for the future. Here are a few ways to utilize credit.
There has been a rise in awareness of the risks of taking out credit in recent years due to the growing number of indebted South Africans.
According to Kay Geldenhuys, sales manager at Fulfilment at Ooba Home Loans, South Africa’s foremost home loan comparison service, if credit is used in a constructive way, it can be a vital tool for building wealth for the future.
Using credit to build wealth
Geldenhuys offers many methods for consumers to use credit to their economic advantage.
Another tremendous example of leveraging excellent credit is the creation of wealth through property ownership as property owners use the lender’s finances to cover the purchase price of their structure, only paying back a fractional percentage each month while the asset appreciates in stock value.
South African interest rates are at a record low of 7.5%, making them the best opportunity to invest in real estate, which has become one of the most well-established capitalistic assets.
The supply and demand for luxury real estate continues to bolster the efficacy of property investments. This favorably impacts the position of purchasers, who have great leverage when negotiating to buy luxury real estate.
You should ascertain that a property purchase is a wise long-term investment only if there’s a steady area property market as well as a requirement for rental properties.
Prospective buyers should also negotiate with their lender for the best interest rate concession, and if necessary, shop around with other lending institutions to discover the most cost-effective credit and maximize their investment. Ooba Home Loans, South Africa’s largest home loan comparison service, can help customers make this process simpler by connecting them with multiple banking institutions and obtaining the best deal for the application and loan.
Just remember that land is an investment, not a quick route to riches. You must be willing to hold onto it through the dips and troughs we’ve seen in recent years.
2. Credit cards
Most consumers do not understand that debit cards can be used to their advantage, advises Geldenhuijs. Your debit card lets you earn interest on your current account when you use the bank’s funds to pay for purchases. However, she recommends that only do this if you are disciplined and pay the complete outstanding balance every month to avoid interest costs on your credit card.
3. Capital acquisition
Another good kind of credit is a capital acquisition that necessitates financing from a bank, and which you can derive income from.
A capital acquisition is an investment in property that is income generating or machinery or equipment. Credit for such assets makes you richer, though credit for luxury purchases like a car or clothing loans you money.
4. Debt consolidation
You can adopt a home loan credit consolidation strategy to better control your expenses. “Your reduced refinance home loan rate will be significantly cheaper than the loan rates of your retail and installment sale accounts.” But remember, you’ll be financing these consolidated accounts over the course of the home loan, which is likely to be longer than the term you may have chosen.
At this time, they must not be tempted to use bank cards to consolidate debt or have cards to pay off portions of previous debts.
Once you’ve taken care of your wealth creation, you must also ensure your credit facility pays an upgrade so you can make progress toward your money creation goals.
For example, depositing a R20 000 lump sum into a million rand bond will save you R58 646 in interest over the loan period if your interest rate is 7%. This will result in your repayments being reduced to 19.15 years on a 20-year bond.
The importance of a good credit record
Good credit (anything over 620) gives you greater chances of getting loans, such as mortgages, and will earn you better interest rates. Improving your credit record includes making timely payments, paying bills on time, and paying off the total on bills.
Property investment made easier
To get started, you may want to look into ooba Home Loans, the leading home loan comparator in South Africa, which offers numerous tools for prospective buyers. Begin with a home loan amount estimate from the ooba Home Loans Bond Indicator, then examine your lending options with the ooba Home Loans Bond Calculator. When you get to the home mortgage application stage, the last step is to complete it.