How do you feel about financing?

[Caoineag]

Thought it would be interesting to poll this because I have encountered a variety of sentiments on this matter.

My vote is that as long as I am not paying interest, I love discounts and having a little extra time to cash flow items but I am pretty sure I am in the minority.

[disneysteve]

I didn't vote because you can only pick one and I also don't like the choices. I think it totally depends on the situation, what is being financed, for how long, at what interest rate, etc.

As a broad generalization, I think financing can be just fine if done properly. If not for financing, I wouldn't have had a couple of my cars, I wouldn't have had my undergrad and graduate education and I wouldn't have my home, just to name a few things I've financed over the years, so to say it is never okay to finance would be ludicrous. On the other hand, if somebody tells me that they just bought a brand new car with a 7-year loan, I'd have to say that was a lousy move and shouldn't happen for anyone ever. So that instance of financing is never okay.

As for zero % financing, it still depends. Overpaying for a brand new car in order to get 0% instead of buying a much cheaper 2-3 year old car at 5% or 6% doesn't make the 0% a good deal. Opening a new credit card account at every store you go to just to get 15% off your purchase isn't a good deal.

So my answer is a definite 'It depends on the situation.'

[arthurb999]

Not too many peope buy houses for cash

[Caoineag]

Actually I am talking normal purchases you were going to make anyways.

If I am buying a lot of items, I am okay with opening a card solely to get the discount. Its never been an issue, hasn't hurt my credit score and I have never carried a balance on a store card. Hence the option I picked. But I am aware most people are very much against that.

I try to be specific but sometimes I just don't pay close enough attention.

[disneysteve]

Originally Posted by Caoineag

Actually I am talking normal purchases you were going to make anyways.

I suppose if you want to get technical, every time I pay with my credit card, I am financing the purchase. I'm borrowing the money from the CC company and will pay them back at a later date. In my case, I pay it in full each month so it amounts to 0% financing. I think that is absolutely fine. I do it nearly every day.

I do not think it is okay to use your credit card and not pay the bill in full each month unless you have a 0% rate on the card, and then it is fine as long as you will pay off the balance before the 0% deal expires.

[kork13]

Originally Posted by disneysteve

I suppose if you want to get technical, every time I pay with my credit card, I am financing the purchase. I'm borrowing the money from the CC company and will pay them back at a later date. In my case, I pay it in full each month so it amounts to 0% financing. I think that is absolutely fine. I do it nearly every day.

Ditto. It's the simplest option, and so long as I pay it in full every month, it's essentially free financing. I encourage any financially responsible person to do the same.

[simpleyme]

I can not get it to make sense for me to finance things I have money for

I do not finance but I could care less if other do or not ;-)

[jIM_Ohio]

Financing depends more on the PERSON than the object being purchased.

I finance cars, I purchase things on CC and I financed my house. All debts are current or paid in full (in case of cc).

Others would be best served financing nothing and paying cash for everything.

[disneysteve]

Originally Posted by simpleyme

I can not get it to make sense for me to finance things I have money for

It depends on the situation. If you can finance something at 0% and keep your money in an account earning 3%, that makes sense.

[simpleyme]

Originally Posted by jIM_Ohio

Financing depends more on the PERSON than the object being purchased.

I finance cars, I purchase things on CC and I financed my house. All debts are current or paid in full (in case of cc).

Others would be best served financing nothing and paying cash for everything.

so ize no finance cuz not smart as yoo?

[simpleyme]

Originally Posted by disneysteve

It depends on the situation. If you can finance something at 0% and keep your money in an account earning 3%, that makes sense.

I guess I just prefer to pay for things whats everyone buying on 0 %anyway?

[disneysteve]

Originally Posted by simpleyme

I guess I just prefer to pay for things whats everyone buying on 0 %anyway?

As I said, every time I use a credit card, I'm doing 0% financing until the bill comes, so pretty much everything I buy from gas to groceries to clothing to travel costs to dining out to whatever else gets financed at 0% for a month or so.

People take advantage of 0% offers to buy everything from cars to appliances to furniture and more. Used properly and responsibly, it can save you a bunch of money.

[Maismom]

I'm for it as long as I get extra (like extra discount or rewards). I paid them off before I pay any interest anyway.

I also charged my tuition when AMEX had 15 mos. 0% interest offer. That buys me time till I get reimbursed from my company. I have to finish my courses before I get the money back

[simpleyme]

Originally Posted by disneysteve

As I said, every time I use a credit card, I'm doing 0% financing until the bill comes, so pretty much everything I buy from gas to groceries to clothing to travel costs to dining out to whatever else gets financed at 0% for a month or so.

People take advantage of 0% offers to buy everything from cars to appliances to furniture and more. Used properly and responsibly, it can save you a bunch of money.

yes it sounds like it works for you ;-) I just see little value for ME in having a 30 day loan;-)

I have found buying with cash is they way to really save money but I guess that may not work for everyone either

if I want a couch I can just ask for 3 percent off as they mark stuff up to cover all the merchant fees , pay for it and be done with it

[disneysteve]

Originally Posted by simpleyme

yes it sounds like it works for you ;-) I just see little value for ME in having a 30 day loan;-)

if I want a couch I can just ask for 3 percent off as they mark stuff up to cover all the merchant fees , pay for it and be done with it

I don't use the CC because I need the loan. I use it because it is very convenient and because of the rewards I earn. Last year (2007) we earned about $900 in rewards using CCs to make purchases we would have made anyway, so why not use the cards and get all that money back?

As for that couch, you are absolutely right. The furniture stores that advertise 0% until 2012 usually say in the small print that there is a 10% discount for cash purchases, so the "free" financing isn't really free. But if you charge on a 0% CC, it really is free, as long as you pay on time.

[maat55]

I'm not completely against financing, but I would like to see limited, safer financial products offered, only. Such as: Fixed rate loans on homes with at least 10% down, No more than 3 year notes on cars with 20% down. I would also like to see some form of limitation on CC's.(would not bother me to see them extinguished)

[disneysteve]

Originally Posted by maat55

I'm not completely against financing, but I would like to see limited, safer financial products offered, only. Such as: Fixed rate loans on homes with at least 10% down, No more than 3 year notes on cars with 20% down. I would also like to see some form of limitation on CC's.(would not bother me to see them extinguished)

I agree. I think the whole banking/credit/lending industry needs to be much more regulated, like it used to be. We wouldn't be in the whole economic mess, housing bubble, credit crisis if there were still usury laws and tighter qualification rules for getting loans.

The government loves to tout that home ownership is at record levels, but the reality is that not everyone can (or should) afford to be a home owner.

How many threads on this site are started by people who are in a phenomenal amount of debt relative to their incomes? They never should have been allowed to borrow all of that money in the first place. Had there been a reasonable limit on the credit extended to them, they wouldn't be in the trouble they are now in. Of course, personal responsibility has to play a big part, but not everyone is educated on how to manage money. They assume that if the bank says they can afford the loan, it must be true. But the banks have been lying to millions of people, making ridiculous loans that the borrower couldn't possibly afford. Same goes for credit card companies. How do you approve a college student with no job and no income for a credit card? When I was in college, my friends and I used to go around and apply for all the cards to get the free gifts because we knew there was no way we'd get approved. We had no money. Today, as long as you have a pulse, they'll give you a card. They know full well that a high percentage of those kids will not be able to pay the bills.

Ok. Rant over for now.

[MiikeB]

I think financing at 0% is always ok if the purchase would have been made anyway. I fail to see a negative here, especially if the money is set aside.

I think financing with interest is sometimes ok, but with the exception of a mortgage, student loans or interest rates lower than 3%, always unpleasent. I think the others are ok because after the tax writeoff they usually fall under 3% and it is easy to outpace those rates with investments.

Financing is always a choice though, and I feel like if people understand what they are getting in to and have a plan that it can be used to improve quality of life. I myself am torn with a financing decision. My neighborhood sucks a lot and I am tired of having tenants. This is a situation I partly put myself in (could not predict the neighborhood, knew I needed to keep tenants to live comfortably here) and now in order to get out I would have to finance part of the amount I am upside down on at a rate of around 10% since it is considered a personal loan. I feel like it is a decision to make, and even though paying interest sucks I feel like if I decide to finance my way out it is not irresponsible, as long as I enter in to the situation with a plan.

[MonkeyMama]

Pretty much would only finance 0% (& would buy almost anything at 0% if the reward was worth it; or could earn a decent amount in a savings account in the interim).

BTW, we financed our last car purchase at the dealership. They offered a lower price than otherwise, and we paid it off the next day. So that was the one time I took an interest rate. But it was just for a couple of days, and saved us around $1k on an otherwise cash car purchase.

[disneysteve]

Originally Posted by MonkeyMama

BTW, we financed our last car purchase at the dealership. They offered a lower price than otherwise, and we paid it off the next day. So that was the one time I took an interest rate. But it was just for a couple of days, and saved us around $1k on an otherwise cash car purchase.

This is a good example of where paying cash may not be the best option. Since the prices are negotiable, they factor the form of payment into the negotiation. If they aren't making money on the financing, they charge more for the purchase. It can make more sense to finance instead of cash for the car (and then pay it off soon after). As I said above with furniture, there it makes more sense to pay cash than to finance. There is no one-size-fits-all answer.