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3134 TOPIC 5 Using Credit.doc - TOPIC 5 USING CREDIT MORE...

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Star, Thursday October 14, 2010 TOPIC 5: USING CREDIT MORE BANKRUPT YOUTHS Some 1,046 out of 83,389 bankruptcy cases recorded since 2005 by the Insolvency Department involved youths under 25 years old , Deputy Minister in Prime Minister’s Department Datuk Liew Vui Keong said. He said of the total, 487 or 46.5% of them were declared bankrupt for failing to settle vehicle loans, while 354 (33.8%) were for personal loans. Liew said other bankruptcy cases mostly involved failure to settle business or housing loans, while six cases involved failure to repay income tax and two others failed to repay study loans . “Some became bankrupt for becoming guarantors ; failing to settle credit card payments, scholarships or education loans ,” he said. Liew said the department was reviewing bankruptcy laws with the aim of strengthening them and spurring economic growth. Initiatives implemented include 61 “Outreach and Awareness” programs to brief people on the adverse effects of bankruptcy and how to overcome it. “This resulted in a 44.6% reduction to 139 bankruptcy cases among 25 year olds over the first seven months compared to 251 cases for the corresponding period last year,” he said. Liew also urged those who were facing bankruptcy problems to approach the department for help. He added that the department was also looking into tightening the bankruptcy declaration procedures as well as introducing alternatives other than declaring an insolvent person a bankrupt. 1
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Credit Management Consumer credit can be used in one form or another to purchase just about every type of goods or services. It is a convenient way to make transaction but when consumer credit is misused it can lead to real problems 1. Why use credit? People typically borrow to pay for items or services that cost more than consumers can afford to pay out of current Income. By spreading payment over time, expensive items become more affordable, and as a result, consumers can obtain the immediate use of an asset without having to fully pay for it for many years. 1.1 Reasons for borrowing: i. To avoid paying cash for large expenses Make purchases of big ticket item affordable as payment is spread over time Example: Purchase of house, car etc. ii. Financial Emergencies When unexpected expenses arise Example: To sustain during unemployment 2
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iii. Convenience It is easier to pay with credit card than with cheque. Credit card purchase is a form of borrowing – charge now pays later. iv. Investment Purposes Margin financing – investor partially finance their purchase of shares. The 5Cs of Credit Regardless of where you seek funding a prospective lender will review your creditworthiness. A complete and thoroughly documented loan request (including a business plan) will help the lender understand you and your business.
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