APMacro P2: Spending and Credit


Credit allows people to obtain the use of money that they do not have. To obtain credit, a prospective borrower must convince someone else, usually a lender, to provide a loan in return for the borrower’s promise to pay the money back, plus an additional charge called interest. People obtain loans to buy cars, homes, and major appliances, to improve their homes, to pay for college education, and so forth.

Credit decisions, whether to borrow money, and for what reasons, can be difficult. Like all difficult decisions, credit decisions involve examining the advantages and disadvantages facing the individual making the choice. The hard part, of course, is figuring out whether the advantages of using credit outweigh the disadvantages.



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