How do you feel about financing?

[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]

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]

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.

[simpleyme]

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.

I sure agree there is no one size fits all answer but with our last car we let them asume we would finance got the firm price then paid,they make less with cash and are unimpressed with cash so you just go until the deal is all but done pull out the checkbook and be prepared to walk if they change the deal , my Dh is good at this type of negotiation

we have had friends had their deals pulled when it was found out they were paying cash, but unless you are buying a rare car you just go to the next lot ,there were 4 lots in my general area with my exact car

[cameronr]

I've always found cash works better than credit. Try it the next time you're in a furniture or electronics store. Pull out a stack of $100 dollar bills and see if you can't get a deal.

[disneysteve]

I've always found cash works better than credit. Try it the next time you're in a furniture or electronics store. Pull out a stack of $100 dollar bills and see if you can't get a deal.

I think this depends on the store. At a large chain, it probably won't matter. The 20-year-old working at Best Buy doesn't care how you are paying. He doesn't care that when you charge it, the store makes less money. But at an independent store, the owner definitely cares and will probably be more willing to negotiate a cash discount to save himself from paying the 3% fee to the credit card company.

[GabRob]

Debt is always a problem you have to learn to live within yor means.

[Caoineag]

Interesting. I didn't expect this to be quite so balanced. I was under the impression we had a lot more all debt is evil people than we seem to (not that there is anything wrong with that, its just not how I feel about it).

[disneysteve]

Interesting. I didn't expect this to be quite so balanced. I was under the impression we had a lot more all debt is evil people than we seem to

Of course, polls like this are self-selecting based on who chooses to respond, but I think as people become more financially educated, they come to understand how debt can be used to their advantage, rather than just to get stuff that they really can't afford. Debt is a tool. Like any tool, it should be used properly and responsibly.

[maat55]

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.

I enjoyed every word of it. Borrowing should not be easy and should come with bigger down payments and better repayment history.

[disneysteve]

I enjoyed every word of it. Borrowing should not be easy and should come with bigger down payments and better repayment history.

Not only that, but minimum payments on credit cards should be much higher. Every time my CC bill comes and the bill is for $3,000.00 and it says my minimum payment due is just $60, I can't help but realize how ridiculous that is. No wonder people get into trouble. When the electric bill comes or the phone bill or my mortgage statement, the bill is what it is. There is no option to just pay 2% of it, nor should there be. Raise the minimum payment on credit cards to 25%. Give people 3-4 months to pay off a large purchase. That's more than enough. If it isn't, they shouldn't be buying whatever they are buying.

Years ago, if you wanted a loan, the joke used to be that you first had to prove that you didn't need the money. Now (until just recently) they approve anyone for any amount it seems.

[kork13]

is no option to just pay 2% of it, nor should there be. Raise the minimum payment on credit cards to 25%. Give people 3-4 months to pay off a large purchase. That's more than enough. If it isn't, they shouldn't be buying whatever they are buying.

It would be nice for that to be the case, but realistically, it can't be, because "3-4 months to pay off a large purchase" won't happen. Whether it's good or not, many people simply do not save for large expenses... vacations, electronics, or whatever. I do think a higher minimum would be better, but realistically I can't see it being over 10%.

[Investing First Steps]

I'd make the argument that ultimately you should finance anything if you have something better to do with the money. I don't believe it's a moral decision, simply a business one. If you can borrow money at 0% and earn 4% on it, more power to you. I don't recommend that as a tool for leveraging into risky propositions however. It's also important to make sure 0% means 0%. I just recently bought a new car and they offered 0% financing, but with a different price. Why would I rather pay my interest up front? I paid cash.

One other reason you might want to finance some things such as a car is to get a history of "installment debt" on your credit rating. I pay cash for nearly everything, so when I want to purchase a car or house, they find it somewhat disconcerting that I've never had any "installment debt." I don't find that compelling enough to pay interest to get such a history, but some who are thinking about buying a home may consider it.