follow the bouncing ball

jus2shy wrote:
Another note is that some people purposefully take the longer term finance, with the full intent of paying off early. I personally do this (done it for many things, including my student loan), just in case events in life come up and I need to cut back on paying bills, I have that flexibility. Currently planning on a spring purchase for a trailer myself and plan on taking the long term, just so I can remain flexible. Truck is almost paid off and I figure that I'm paying an "Opportunity" cost to get a trailer sooner rather than later, as kids don't remain toddlers forever and I'm personally tired of the tent camping lifestyle. Once truck is paid off, trailer becomes the "Vehicle" monthly bill.

What I'm certainly sure most people can agree to on this board is that many people out there are financially illiterate. They don't understand the concept of an opportunity cost (interest on most debts), and what you're supposed to do when you take out that loan (invest said cash so it can make money, using your dollars to work for you). A lot of people do tend to stretch themselves living paycheck to paycheck. Some in my family included (no matter what I advise). I remember reading a few articles where only 25% of Americans can come up with $1k or $2k within a couple weeks to pay for an unexpected event. That's just appalling. I think more "Finance" classes should be offered in our school curricula so that people don't get swindled at car dealerships, home purchases, or even RV purchases. So that people can understand what it truly means to "Afford" something. I could go out and buy a Porsche 911 GTS. But I know I can't afford a Porsche 911 GTS, not if I want to hit my other life goal of early retirement. Good ol' give and take :).

Good post. But,,, I have a question. If you take out a long term loan and then pay it off early don't you still have to pay the full interest that would be on the loan??? A lot of institutions will gladly loan you money long term but, the interest rate over the term of the loan is so big that you could have bought the original purchase twice.

Back in the day, just after I graduated high school some friends of mine got married and took out a loan to buy stuff. Like a Television for example. They took out a long term loan and made the minimum payments. After awhile they figured out that they were never paying down the principle debt. All they were doing was paying the interest. They had paid for the TV twice. They had to get a lawyer to get the mess all straighten out. Once he got involved the loan lending institution gave up. After all they had gotten their money back X2.