As soon as I saw the post about Lazy Borrowers it reminded me of an experience I had in a store out here. There was a couple shopping for a huge flat screen TV at the same time I was looking for a much more reasonably priced unit. The salesman said that it would be $250 a month for 24 months for the TV the couple wanted. The man said that he could only afford $200 a month. The salesman looked like the request was impossible, but said he’d go back to his manager and see if he could work something else. About 10 minutes later, the salesman returned and said that they could do it for $200 for 36 months. The couple both broke into huge smiles as if the salesman had done them a huge favor and signed the papers right away. I sat there wondering if they even had a clue that they agreed to buy the TV set for over $1000 more than the first offer?
There seem to be a growing number of people that believe that if they pay a monthly price that they can afford, then they were able to get a good deal without considering the interest rate or length of the offer. This type of thinking is one of the deadliest debt traps out there.
It is essential that you look at all aspects of the deal when you decide to finance. It’s a combination of monthly payment, interest rate and length of contract that should concern you, not individual components of the three. By understanding all three of these you will be able to see exactly the type of deal you’re receiving and what you’re really paying for the item you’re purchasing. Knowing exactly what you’re paying is an essential element in getting your finances in order and reducing your debt.