Lantley wrote:
The idea of paying cash generally keeps transactions clean simple and straight forward, however cash is not foolproof or always the best method.
Cash makes for a very quick and easy transaction for both parties.
Any type transaction with a asset which has a title and registration plus a lender/loan/lien makes for a potential messy transaction which involves considerable risk to all parties. Loans/liens also take considerable amount of time and adds cost to the transaction.
Lantley wrote:
There are times when low interest or 0% loans are a better method.
When? I cannot even think of this as a viable method unless there is no other way you can get a loan and even then a good chance you cannot afford the loan.
Zero interest or low interest loans ARE 100% subsidized and paid for by the BUYER in the form of a non discounted price. It is a marketing gimmick by the dealer and bank to get you to buy, thinking you are getting it for no extra cost when in reality, what happens is you sacrifice getting some of the dealer's discounts, you in the and pay a HIGHER upfront price (which happens to be the same equivalent cost as the interest you will pay for the length of the loan (IE you are paying ALL of the interest owed UP FRONT).
ALL zero interest loans are known as "closed ended" loans, since you paid the interest in full upfront, you get zero discount if you pay off the loan early and some banks may even penalize you with an additional charge.
I make use of paying off loans EARLY, every month I add an extra $10, $20, $50 to the payment towards the principle borrowed. Saves me tons of money on the purchase of the item. The interest I would have paid to the bank I put into my pocket which goes into may savings account for future purchases.
Many yrs ago, I wanted to buy a subcompact tractor with front loader, backhoe.. The tractor manufacturer offered $1K cash back outright purchase OR ZERO PERCENT loan.. My local bank would not finance the tractor unless it was a very high interest rate personal loan and I didn't have enough cash to buy out right at that time.. I took the zero interest loan and gave up the $1K dealer cash back, the $1,000 was the interest I paid for upfront.
Lantley wrote:
There are also times when using someone else's money is better than using your own!....especially when you don't have your own money to use. LOL
There is nothing wrong with "using" others money in the form of credit, provided you do not over extend yourself to the point of having to make the choice between eating, paying rent and making all of the interest laden payments every month.
Responsible use within reason, the problem is folks tend to get caught up in the supersize mentality of life.. A few pennies here and a few pennies there and soon you have much of your life enslaved to paying just the bare minimum payment charges, diggin the hole deeper and deeper into debt.
I have seen a lot of good folks go down that borrowing rabbit hole and lose it all, homes, cars and even marriages. One even had their home fully paid off, took out a loan against the home with variable rate when the interest was low.. When the housing bubble burst, they too found themselves with interest payments that eclipsed their income several times over..
Lantley wrote:
I digress...Using credit or borrowing is not always a bad thing vs. using your own cash. The key is to understand what you are doing and know how much the total transaction is costing you.
Like I said, nothing wrong with using credit, the problem is, folks get used to having that payment and don't think twice about adding more and more interest bearing debt.. Everytime you involve a loan, you are removing real money you could be using out of your pocket and handing it to the rich bankers.. I have not as yet seen a bank president driving a 20yr old rusted out barely running beater car.
Off soap box..
