by Michael Smith (Veshengro)
Taking out a bank loan is the worst thing anyone can do and the same goes for working with so-called credit cards.
While it is true that some people need to take out a loan at times simply to make ends meet, which in itself is already bad due to the system being designed against them, basically, applying for credit in any shape is a bad idea.
And, I may add here also the buying something on the “never-never”, as it is often called in Britain, that is to say on hire purchase or on catalog credit or whatever. The interest rates, even though presently the bank rates may be at an all time low, are horrendous and the same goes for credit cards.
The best thing to do with the latter is to pay them off, if you have any, and then cut them up into tiny little pieces and dispose off those pieces carefully.
When I was a child I was taught not ever to buy anything that I could not afford to buy in cash and almost everything was still bought in cash then in shops. The use of checks was few and far between and though some people used catalog shopping and the credit that was offered buying on hire purchase, paying off in installments, most saved up and then bought with a wad of cash. And, while paying in cash, especially large amounts can get you into trouble nowadays even, I still today buy only something if I have the money to do so in my bank account. If I think I cannot afford something then that has to wait until I have save the money up top buy it.
But people today do not want to wait. Instant gratification seems the order of the day and they have to have what they want immediately, preferably yesterday. And thus, if they can't afford it, they use credit cards or a bank load, if they can get it. Well, and if that does not work for some then it has to be a criminal act but they have to have what they want there and then immediately. But I digressed a little with the last sentence.
Loans, however, whether from mail order catalogs (with the internet those and the loans are few and far between though nowadays), using credit cards, banks, or whatever, all have a very hefty interest rate attached to them, some as high as 35% and more per year. Far higher than any mortgage. But that is also a loan and is, probably, best avoided.
The best thing to do is to avoid debt in any way, shape or form, because it is going to haunt you and may end up biting you in the proverbial. Learn to be frugal instead and to manage your money and save for things and then save for the best possible version of it; go for quality rather than cheapness, and try to get something that will be repairable.