A lot of people get nervous when discussing debt and that’s not such a bad thing for most consumers and businesses. Debt isn’t a toy for enjoying life’s pleasures; it’s a tool for building financial capacity and growing business operations. Here are some tips for using debt to help develop financial prospects.
Small and medium enterprises (SMEs) operating with a limited cash flow are in need of funding support.
The Organisation for Economic Development and Co-operation conducts an annual report that addresses the availability of financing to SMEs.
The concept of debt is misunderstood and seems to carry with it a sense of apprehension but we as Australians seem to have a love hate relationship with debt.
For small and medium enterprises (SMEs) debt is not always a terrible thing as it allows them to expand their operations.
Lack of capital funding is one of the most significant issues faced by many entrepreneurs. While an entrepreneur may have a great idea and be incredibly passionate, the absence of operating cash means that a business will struggle to remain viable.
It is also a difficult situation when entrepreneurs who have already experienced success choose to devote all of their personal net wealth into their business. In this situation, personal finances are very likely to suffer.
In the wake of banks choosing to only pass on a fraction of the interest rate cuts made by the Reserve Bank, credit card customers are rushing to pay off their credit card debts. People with car loans and personal loans are behaving in a similar way too
Figures recently released by the Reserve Bank show that in the 2013 year to March, the average credit card debt was $3256.70. This marks an average reduction of 2.4%
According to financial commentator David Koch, the Government is likely to announce that the Federal Budget is facing a $12 billion deficit due to weakening revenue from mining and the carbon tax as well as reduced company tax revenue.
According to Nathan Bell, research director at Intelligent Investor Share Advisor, financial independence brings peace of mind and that while many Australians have put off retirement due to years of poor investment returns there are ways to achieve financial success and weather the impact of tax, the threat of recession and inflation.
Bell advises a cautious approach to debt especially borrowing for products such as margin loans and where possible to avoid personal loans and big credit card balances.
According to the Australian Prudential and Regulation Authority (APRA), Australians owed $58.6 billion in personal loans and $40.8 billion was outstanding on credit cards for the year ending December 2012.
In choosing whether to borrow on a credit card or take out a personal loan both options should be carefully considered in relation to interest rates, repayment options, penalties, fees and charges, according to RateCity spokeswoman Michelle Hutchison.
Demand for consumer credit rose by 4.1 per cent last year according to Veda, a market research company, in its fourth quarter 2012 Quarterly Consumer Credit Demand Index.
Based on the index measurement personal loan applications increased 10 per cent year on year, however, credit card applications declined by 2 per cent with mortgage lending remaining flat.
Many Australians are looking to reduce personal debt and save more but are seemingly unsure how best to consolidate their debts to achieve this.
According to Wayne Matters, a financial officer with CPS credit union the decision on whether to use a personal loan or the option of the zero interest balance transfer available on certain credit cards on offer as a means to consolidate debt depends on how much a person owes, and how soon they are looking to pay it off.