Although there are obvious pitfalls to taking out a mortgage or a new car loan which are not a problem with unsecured credit, there is no doubt that unsecured borrowing can still be a very risky endeavor. In my opinion, you should never take on this kind of debt.
Just because the lender cannot repossess your possessions to make good on the loan, this does not mean that you cannot be put in a very risky situation financially. The first thing that will happen when you miss a payment on a loan or credit card is that you will go into the company’s “collections” file and they will pursue you for payment.
As well as entering the collections department, you will find that your credit record will contain the information of your missed payment. This black mark on your credit will then affect the types of loans and the interest rates that are available to you if you decide to purchase a home mortgage or take out a car or a business loan.
Utility companies will often take a look at your credit to determine whether or not you have to put down a deposit to open an account with them. In fact, many employers now run credit reports on prospective employees, so a bad credit rating can even affect your ability to get a job!
If you are still unable to pay your debt, no matter how valid a reason you may have, you can be sued and have your bank account or wages garnished to satisfy the credit car bill, interest, court and legal fees.
Again, I suggest you just don’t use credit cards. Learn to live within or below your means and save up for the more expensive items you want to buy. If you can’t pay cash, don’t buy it!