Chryss John Querol

FM2 – Credit and Collection

Lesson 1&2 Reflection Paper

There are many personal finance topics that are important to me, but one that

stands out is Credit Cards and Debt. As a college student, this is important to me

because credit card companies frequently target students. They do this because they

know they are on top of the latest trends and don't always do their homework when it

comes to credit card interest rates and policies. Many students sign up without first

reading what they are signing up for. Before signing up for a credit card, make sure you

understand everything about it, including the interest rates, fees, and so on.

Having a credit card can be beneficial if you know how to use it properly. "Credit

cards also offer students without loans the opportunity to establish their credit and

spend four years proving they are responsible borrowers before graduation," writes Erin

Lowry in her article The Case for College Students to Have Credit Cards. Not to be

forgotten, recent graduates who don't want to live in their parents' basement will require

a credit score in order to obtain their own apartment or house.” When you finish college

or graduate, you should start looking for your own place, whether it's an apartment or a

house. To rent or buy a home, you'll need a credit score. When you think about it, credit

cards are amazing little plastic things, but they can also be a bad thing. They have the

ability to produce a small but frightening word that no one wants to think about: debt. "A

credit card shouldn't be used any differently than a debit card," Erin Lowery writes in the

same article, "except you have to pay your bill at the end of the month instead of

automatically seeing the money deducted from your account." I completely agree. It's
critical to understand this aspect of having a credit card because if you don't pay off

your balance, you'll find yourself in a bind.

People had to carry and keep a large amount of cash with them at all times for a

long time. They couldn't keep it in this location because it wasn't storable. Because of

their many benefits, credit cards aided many people after they were introduced. Credit

cards are a valuable resource for people and one of the most important financial

inventions. Some people believe that using credit cards has drawbacks and is not a

wise decision. However, I believe that using credit cards is a good idea and beneficial to

the majority of people. More benefits, a better way to structure money, and it is safer for

people to use are just a few of the benefits.

Credit cards have more benefits and features for people, which is one of their

advantages. Credit cards are very convenient because they are much easier to carry

around than cash. Credit cards are more convenient to carry than cash because of the

numerous benefits that come with them. Typically, each credit card user receives a

variety of packages and offers from the credit card company. People can earn frequent

flier miles based on how much they spend on their credit cards once they start using

them more frequently. Another advantage of using credit cards is that as time passes,

the company can offer different promotions or packages to customers, such as

discounts on cars and other desirable items. These promotions are another way to

promote the use of credit cards, which is extremely advantageous. People who do not

use credit cards and prefer to carry cash do not have access to any of the benefits and

promotion packages available to credit card users.

 Because your company is growing, you'll need to purchase more equipment and

fund rising accounts receivable balances. How do you persuade a bank to lend you

money for your business? Give the bank a business plan first. Demonstrate that your

company is stable and that you have a proven track record of success. Convince the

bank that you don't need their money, but here's what you could do with it if you did.

When it comes to lending to desperate borrowers, banks get nervous. Make a list of

how much money you'll need, what you'll do with it, and how you'll repay it.

Character is at the top of the list. Your loan request will be denied if the bank

does not trust you or believe you are an honest person. Even if you have a lot of

collateral, it won't be enough to compensate for a lack of trust. The lender must have

faith that the borrower has the necessary experience, education, and industry

knowledge to run the business successfully. When it comes to getting a bank loan, the

borrower's reputation is crucial. Your credit history will reveal your debt repayment

history. When a bank makes a loan, it devises a repayment strategy for the borrower. If

the borrower fails to repay the loan, the bank is forced to rely on the collateral. Because

the sale of the collateral may not be enough to pay off the loan, a lender will never use it

to repay a loan. Banks like to use property and assets as collateral in order to recover

their loans if the borrower does not pay on time. The borrower must demonstrate that

the loan can be repaid from the company's cash flow. The bank will look at a company's

debt-to-income ratio as well as the amount of free cash flow it generates. Lenders prefer

these ratios because they provide a safety net in the event of a business downturn.

Banks are more at ease when the owner has put his own money into the company.

Lenders prefer to know that if the business fails, the owner will lose money. Why should
the bank invest in the business if the owner isn't? Banks prefer lending to companies

with a large amount of capital because it indicates that the owners have some "skin in

the game." When business owners have more personal capital invested in the

company, they will fight harder and make greater sacrifices to save the company and

repay their debts. Aside from the borrower, bankers will consider the overall economy,

industry trends, and even political trends. They are considering factors that are beyond

the control of the business owner and will have an impact on the company's

performance.