Don't use credit cards, but still take loans?by Andrea Hermitt | More from this Blogger 27 Jul 2009 11:13 AM A blog called I've paid for this twice already explains that anything purchased with credit cards is paid for again in interests, and maybe multiple times by the time the credit is paid off. Many of use have realized this and stopped using credit cards, but how many of us still take out loans and buy items on credit. Any kid on non-secured debt sucks extra money out of your pocket. Furniture loans, are financed by the stores and often through high risk programs that charge 10% or more interest for the honor of buying a sofa or entertainment center. A high risk loan or no-credit loan may cost tons more. Six month no-interest loans are the worst offenders. Many stores give customers 6 month no interest no payment loans will charge all interest retroactively from the day you purchased the furniture. In addition, if you may any payment late, you will be charged a higher interest rate retroactively to to date you purchased the furniture. These loans are far worse than credit cards. Don't use them. Save your money for a year and purchase your furniture with cash. Why pay for something for 3-5 years that you can pay for in one? Car loans are also popular even among those who are sworn off on credit cards. Granted cars can be very expensive, and even after a year of saving the an amount equal to a typical car payment, the most you can get is a junker, but if you really plan ahead for two or three years, you can get a very decent car and never have to pay an interest payment on your car. Let's say you just finished paying off a car that cost you $350 a month. You could use that money to start saving for a new car and continue driving your old car until you have enough. In one year, you could save $4200, which you would need to replace again in a year or two. In two years, you could save $8400 which could get you a decent used car. In three years, you could save $12,600 the cost of a low cost new car, or a very nice used car. Considering that a car can easily last 3 to 5 years after a 5 year loan is paid off, with a good amount of discipline, buying your next car in cash is very possible. I'm not just preaching about buying a car and other items in cash. This year, I managed to purchase a computer, and a sectional sofa without using credit. It didn't hurt that this was a good year for discounts. Also, my husband's car is paid off in a month, and we will be taking the car payment amount and putting it away for the next year in order to purchase my teenage son his first car. After that, we will begin saving for my husband's next car. To sum this all up, the only loan that I think would be worth taking out is a home loan. Still, deferring home purchase for two or three years, could get you a lower rate on your loan due to a bigger down payment. Andrea Hermitt writes for parenting (specifically teens), the home blog, and also the frugal blog, and homeschooling at families.com. Learn more about Andrea Hermitt  Andrea Hermitt is a native New Yorker currently residing in GA. She has been married for over 16 years and has two teenage children. Relevantfrugal tags User Comments Samual (11722) 27 Jul 2009 11:35 AMThe only loan we have ever had is a mortgage which we are in the process of taking out, we have an 80% deposit so we can pay the mortgage off in ten years. Discuss this article
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