One thing you should keep in mind that if you cannot deny the importance of money, then you will also not neglect the importance of credit and financial services. As you all must be aware of the supply of money is the lifeblood of an economy and functioning of an economy depends on the financial system of a country.
In this article, we are going to cover the importance of both in individual growth and investment. Let’s begin:
Importance of Credit
Role of Credit is very important in our lives and economy. Credit is the trust which allows one person to provide money or resources to another person. Economic activities of a country are supported by the credit system. Credit help us to reach our financial, personal, professional goals that we might not able to achieve without credit. Commercial banks take the savings of people and borrowed them to the needy people and to the businesses as well. Credit enables the individual to “get instant pleasure” or we can say “purchase ahead of their ability”. While receiving an upgraded education, for which you might need to apply for student loans that will need to be pay off after you graduate.
People with a brilliant brain and entrepreneurship mindset with the help of credit can utilize their abilities and qualities in running successful business enterprises. Their talents would have gone waste if they cannot get the credit for their businesses. You need to establish a good credit history for getting a loan to start your business. Bank credit loans facilitate the large scale of production of goods and advancement of technological research. Moreover, if you want to get insurance, insurance companies will check your credit ranking in determining the insurance premium.
One of the important roles of credit in individual growth comes when we consider buying a home. Lender bank needs to make sure that the borrower will pay off the loan. The lender will check your ability to earn enough income to make the loan instalment payment along with other living expenses.
Credit also plays an important role in your investments. Reports of credit ratings of businesses and individuals are provided by credit rating agencies which are used for their grading. This rating is used by investors, banks and financial institutions to make a decision of investing money, buying bonds or debentures, giving loans and giving credit cards. These rating really impact our investment decisions. The better the rating, the more we are comfortable to invest money.
Importance of Financial Services
Financial service is a part of the financial system which provides different types of finance through various credit instruments, financial products, and services. Financial services create more demand for products, in order to meet the demand from the consumers who are looking for more investment options. Presence of financial services enables a country to improve its economic condition. Economic growth is reflected on the people by the higher standard of living. Financial services enable individual to acquire various consumer products through hire purchase, factoring or other means.
Financial services such as mutual fund enable individuals to get more opportunity for the different type of saving options which can assure them a reasonable return on investments. When it comes to raising the capital or promoting investment, merchant banker will come through new issue market and mobilizing more funds. Presence of insurance companies enables producers to minimize their risk which is caused by fluctuating business conditions and natural calamities. Businesses can acquire various types of financial assets which enable them to maximize their returns. For example, various factoring companies enable the produces and seller to increase their turnover and profit.
Finally, I can say if you love it or hate it, you can't ignore the importance of credit and financial services in various aspects of our life.