A wonderful example of the value loans can provide is the auto loan. An auto loan is a great asset because it allows you to buy an incredibly expensive, yet necessary, item for a low monthly payment. Sure, you could buy an old piece of junk in one payment for under a thousand dollars, but if you’re a parent with children in the car, you want to make sure there is up to date safety equipment, air bags, skid control, and a host of other important features you can’t find on a 1985 model. Using an auto loan to help you make such a purchase is not an abuse of credit; it’s a smart way to increase your accessible capital.

Another responsible way to utilize loans is to consolidate your various debts into one monthly payment. This financial strategy has strong roots in common sense and cuts down on the interest paid and the number of monthly payments you need to make. Many people who have several lines of credit open find it a challenge to remember to pay them all each month, which can result in late fees and a hit to their credit. Putting all payments under one loan decreases the chance of this happening, and also will cut down on the monthly amount owed as you aren’t paying both a minimum and interest to each creditor.

Loans are also excellent ways to build your credit. Student loans, car loans, even unsecured credit card loans offer the loan holder a chance to establish a credit history and increase their credit score fast. Making the minimum payments on time every month will lay a positive foundation for larger lines of credit in the future, such as a mortgage or small business loan. And these larger types of credit are more than just bigger owed amounts; they will increase your net worth exponentially and also increase the amount of capital at your disposal. Who thought one small loan could lead to all that?

The point is that loans themselves should not to be feared, they should be embraced as ways to enhance and simplify your life. It is the abuse of these loans that should be feared. Buying more than you can repay with your credit card, buying a fancy car that is out of your current lifestyle budget, and yes, even taking out a mortgage for more house than you can afford are all examples of the dangerous and foolish ways people abuse loans. The best way to avoid being a loan victim is to be honest with yourself and your creditor about your finances, your life situation, and your actual needs. Responsibility with loans leads to bigger financial opportunities, such as high credit scores, low interest rates, and greater lines of credit extended. Don’t let the media scare tactics bully you out of utilizing this awesome resource!