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The following is a guest post. Enjoy!
Secured and/or Unsecured Personal Loans
Interest rates on credit cards tend to be higher than those for overdrafts and personal loans. If, however, you were to clear the full balance outstanding on your credit card by the due date, then no interest would be payable, which would make it cheaper than using your overdraft facility. If you make a cash withdrawal with a credit card, the interest rate is normally significantly higher than if you used your card at the retailer to buy an item. You also pay a cash handling charge to the credit-card company, which would not be the case if you took cash out of your bank account.
How about you all? What options do you currently or have you used in the past to borrow money? How was your experience with it? Did you have trouble paying off the balance in a timely fashion, or did it go pretty smoothly?
In your experience, has paying off debt been a bigger priority so far in life than saving for retirement?
Share your experiences by commenting below!
Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.
- Overall, even though I am not the biggest fan of borrowing money/being in debt, I am also a realist and believe that since many people are short on money these days with no emergency reserves, it’s important to fully understand your options of where to obtain money if you truly need it.
- Personally, here’s my “mantra” on borrowing money that I feel people should shoot for in their personal finances: only borrow money (and pay interest on that money) in order to invest in and/or build appreciating assets.
- What this means is that in general, I believe that people should only borrow money to either:
- Invest in a businesses, and
- Invest in other assets that are able to increase in value over time.
- I would also say that borrowing money to go to a public university (NOT an unnecessarily expensive private college, which, in my opinion, doesn’t provide enough of a return on your money to make it worth the cost).
- All other expenditures should be handled through periodic savings, not through debt. Several examples of things that should not be funded through high interest rate debt are as follows:
- Cars (It’s now more complex to fully explain why car financing isn’t a perfect solution since many auto dealers are now offering 0% interest rate loans. As such, this will be the topic of a future post).
- So, described above is how I believe people should shoot for operating their personal finances and borrowing activities long term.
- However, I’ve learned in my dealings these past two years with blog readers and my friends that a lot of people in today’s economy either a) are already saddled with credit card and student debt and/or b) simply do not make enough money to save periodically in order to buy cars, furniture, or take vacations. Essentially, they feel that taking on more debt is their only choice.
- As you can imagine, in this case, things become more complicated.
- For some non-essential items like taking a vacation or buying furniture, there are options for spending much less money (taking a cheap vacation near-by or buying used furniture come to mind).
- However, for things like medical care or having an automobile to drive to work, these are essential items that are very difficult to do without in today’s society.
- So, all of this is to say that even though borrowing money is not ideal, it is important to know your options so that you can find the best deal. Just keep in mind that borrowing money should not be considered as “normal” in your life. It is only something to use in specific circumstances or when absolutely needed.
***Photo courtesy of http://images.cdn.fotopedia.com/flickr-3274955487-hd.jpg