By John Lee
There’s thousands of books and articles written about how to be financially successful. Some of these books are written for rich people that already have money, and some of them are written to folks that need to feel good about themselves and what they are doing. Many books and articles are written by financial planners and self-help gurus that have lost touch with the average person. I am writing this article from the perspective of a bankruptcy attorney.
Part Three: Never Buy a Computer or Furniture on Credit
The vast majority of bankruptcy clients I see have at some point purchased either a computer or furniture on credit. Another purchase that is very common amongst folks that are heading towards bankruptcy is rent-to-own furniture. Not everybody that buys a computer or furniture on credit files bankruptcy, but everybody that buys a computer or furniture on credit has a severe lack of understanding regarding interest rates and finances. I would carve out one exception to this rule, and that would be if you obtain interest free financing and are able to pay off the interest free loan before interest begins to accrue. Be careful with the so called “interest free financing” because if you are one day late paying the final payment, then all the interest for the entire term is assessed to your account.
For the most part, computers and furniture are luxury items that one does not have to have immediately, in a certain fashion, or even new. The financial arrangement between the consumer and the merchant is so grossly skewed in favor of the merchant that almost any thing is more favorable than entering into such a bad deal. The computer and furniture dealers, including the rent-to-own places charge astronomical interest rates that could cause you could pay three to five times the original purchase price for the consumer goods.
I have seen major computer retail companies charge three to four thousand dollars including interest for a computer that you could get from a department store for $700.00. Think about this, you can get a computer for $700.00 at a department store with cash, or finance a similar computer and make payments for five years totaling three thousand dollars. You could wait one year, save $700.00 in cash and buy the computer out right, and save $2,300.00 in interest charges over the next four years. The same math applies to furniture.
Some may say, but I’m desperate for a computer or furniture. You can still get used computers and furniture for pennies on the dollars to hold you over until you cans save enough cash to purchase the one you want. The inconvenience of dealing with used merchandise is a small price to pay for saving thousands of dollars in interest payments.
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