Posted on April 1, 2010 - by admin

Whether or Not to Borrow

Debt can be used for many purchases and borrowing is not a bad idea is used correctly. There are some purchases that are worth paying for over time and some that are not. By using debt to buy something, you are actually paying for the privilege of paying back that amount over time and that is where the interest comes in.

An interest charge can add up over time and depending whether or not you pay just the minimum amount each month, it could cost you a lot more than you think.  As an example, it you bought a television for one thousand dollars and you used your credit card with a eighteen percent interest charge to pay for it. If you just the minimum of ten dollars on it each month, it would take you ten years to pay it off and the interest you will have paid over those years would total almost eight hundred dollars.  That is like paying for two televisions.

A home purchase is a different story.  A home will increase in value over time where a television would not. If you plan on staying in your home for more than five years, it’s value will either stay the same or go up in value. But this depends on many factors and should be looked into before you buy. The condition and the location of the home are two areas to research.