I am strongly against people buying furniture or phones, computers and other items on hire purchase. This is because of the fact being that the hire purchase companies have to charge high interest rates. They are taking huge risks giving people they don’t know products which their company has to pay for. Thus to mitigate their risk, as they will not be able to collect from all defaulters, they charge you more to cover the loss from others.
If you make use of hire purchase, you end up paying twice or three times the value of the product in some instance. Buying a computer on hore purchase is a bad idea because the interest can be dounle or triple the cash value of the item. You end up paying so much more for an item that is worth less, I have a simple fail proof rule you can teach to your children. If you cannot afford it, don’t buy it. Getting into debt for a longe chair is not going to be relaxing when you default.
Margin financing to buy share
using short term loans such as margin financing to buy shares and other investments is bad debt.
Some people say that it is ggod to use other people money to make more money. Well, if you have saved up and built capital, why not use your own ? If you use other peoples money you still have to pay them back with interest. if you use your own money and accumulated capital because of your adjusted lifestyle. the money you make in returns goes straight to you.
The more you save, the moe cpital you have, the more you invest, the more of your money you have working for you.
Margin financing was a great buzz word in Malaysia in the past, it allowed people to buy shares and take risk without having to come up with their own money. In Certain good economic climates in Malaysia, everyone was doing it with billions of dollar in loans. However. when the financial crunch came,high profile individuals got caught. Recessions always come and you need to avoid over extending yourself. One of the main reasons people borrow more and more money and take greater and greater risk is simply put, greed.
Best pracices when taking loans
Teach your children these best practices when taking out loans and make sure you also model them so that you and your children can beat the system.
Pay debt off as fast as possible
When you have a loans, pay it off faster to reduce your interes, this enables you to sell or dispose of your property or investment whenever you need to. Paying off a loan faster also makes you more resilient to survive a credit crunch better, as you do not having many overheads during a recession period and can live on less.
Pay bigger deposits
Pay a bigger deposit when taking a loan so that so that your installments are smaller and finsish faster.