Question

With the economic good times and peace of the 1920s, Americans found themselves focusing on new consumer opportunities available to them. From automobiles to radios, the buying options grew greatly for Americans. Many Americans began borrowing money (opening lines of credit) to buy what they wanted and needed. How could consumer credit be a good thing? What down sides can consumer credit have?

Answer 1

The good aspects of consumer credit:

It would allow people to buy now what they might not have the money for immediately.

If the borrowing is used to invest in generating income or building marketable skills (education) it could more than pay back what is owed.

Down sides:

The money must be paid back with interest.

Borrowing may encourage people to buy more than they really can afford.

Answer 2

Consumer credits are loans institutions like banks and shops make so people can purchase goods.

Consumer credit offers advantages when used responsible, for example:

• It provides the opportunity for consumers to obtain expensive goods when they don't have the cash to pay the total cost of the good all at once like houses and cars, and improve their way of life.

• It allows the consumer to buy more than what they can afford, by monthly payments.

• Consumer credit can be used at emergencies.

• Consumers can use a product they need while paying for it.

Consumer credit also comes with big disadvantages if not used wisely:

• Credit usually comes with interest rates and costs more than paying with cash.

• It can make consumers forget they don't have the money to pay the loans, and end up in financial issues.

• Consumer's next income is compromised to make payments for the goods purchased now.

• Consumers tend to form bad habits of expending more than what they can afford.