4 ms·

Okay, I repeat my question above: if you can afford to pay over 12 months (meaning, you don't go into debt to do so), what's inherently wrong with doing it inst

by yladiz 4y ago

Okay, I repeat my question above: if you can afford to pay over 12 months (meaning, you don't go into debt to do so), what's inherently wrong with doing it instead of waiting 12 months and paying all at once, besides ideological reasons?

christkv 4y ago
I think the argument is that its easy to get out of control and leave yourself exposed. If you have discipline then I don't see any problems. I might behov the industry to be forced to do more stringent credit checks before allowing it either by law or regulation.
- Dalewyn 4y ago
  I have no sympathy for adults (important distinction!) who have no discipline with their finances. They aren't children who literally don't know better. Those who do have financial discipline should not be inhibited for the sake of those who do not. Besides, /most/ cases of financial ruin aren't literal death. They are generally just very expensive and horrible-to-go-through life lessons.
  - christkv 4y ago
    Sure but regulations are the to avoid them creating systemic risk by lending to dead beats.
kortilla 4y ago
It’s financially reckless. What if you lose your job?
- Ultimatt 4y ago
  You then pay off your outstanding debts if you think there is risk you will be paying out more in the near term... That's why you only carry debt when you could otherwise afford something. Literally thats the point. Realistically though its even better if you lose your job because you have the cash in the bank you would otherwise have sunk into an asset. I just quit my job to be self-employed and have a bit of a career break. Before I did I got a 24 month interest free credit card. If I suddenly have to pay for something really expensive like a new boiler or something, I can put it on there and I have two years to decide what to do, or get a job with zero additional cost. That's security more than it is a liability. I've had a perfect credit score and never paid for credit other than my mortgage interest. People who refuse to use credit out of some broken parental advice of "never carry debt" is far more reckless since you're ignoring an entire avenue of financial management for yourself. Absolutely don't carry debts you cannot afford. But everyone should abuse the fuck out of the credit system, and the institutions designed around fleecing people a lot stupider than you. The bar for credit company profits is set at people where money is like water through their hands, not people who know how to keep a personal budget in a spreadsheet.
  - kortilla 4y ago
    You can’t pay it off if you weren’t able to afford it up front. You’ve changed the scenario from “I can’t afford the full cost but can afford monthly payments” to “I can afford this and am using monthly payments as an interest free loan”.
    - Ultimatt 4y ago
      Go read what I said, the premise was you can afford the item outright but it still doesn't make sense to if you have interest free credit available.
- Rebelgecko 4y ago
  Ideally you have an emergency fund so it doesn't matter. But compared to paying the cost up front I think you'd be better of using BNPL actually. You'll have more cash on hand to pay for necessities like food/rent, in exchange for a ding to your credit score if you don't have enough money left over to pay the monthly payments on the camera you use for your budding photography business
ivanche 4y ago
If you take 12 payments you, by definition, are in debt! It seems you are conflating debt with net worth - a person can have positive net worth and still have debt(s). Even if it is 0% interest you owe money to someone. Every debt is a risk. It may be smaller or larger, but it's a risk. It also normalises the behaviour of going into debt for buying depreciating objects which is bad by itself.
arlcode 4y ago
There is nothing inherently wrong with that but it's a lot more risky then saving up. Say after 10 months an unavoidable bill of $4k shows up and I got to pay it. If I'm saving up I can redirect that money. It sucks that I don't get the camera when I planned to but otherwise I'm fine. Under a BNPL plan I have no extra money to allocate and might have to dip into Credit (potentially with high interest). In short: Savings are fungible, payments are not. Studies show that huge percentage of the population doesn't have any savings. For them it's particularly dangerous to have more recurring bills.
- pandaman 4y ago
  Your method is just as risky - say after you've just spent 5K on your camera an unavoidable bill of $4K shows up? Now you have no extra money and have to dip into Credit (potentially with high interest). Your best strategy would have been to have $5K on hand and still use financing if the terms are favorable - it keeps your funds at steady level, allows for future planning and gives you opportunities to invest or otherwise grow your capital. And yes, people without savings pay for that, it sucks to be such people but they are paying regardless if you take advantage of the financing scheme.
  - happyopossum 4y ago
    Then you sell the camera and pay off the bill. Sheesh - it's a camera, not a life support machine...
    - pandaman 4y ago
      I think you might be overestimating the liquidity of the used camera market a little bit.
      - Sakos 4y ago
        Does it matter? Even if he only gets half the price back, that leaves 1500 left of the debt he has to pay out of pocket. If he's paying monthly for the camera, he suddenly has a $4000 bill on top of whatever of the $5000 debt remains unpaid. I think I'd rather be in the former situation.
mozman 4y ago
Always spend other people’s money, especially at 0%. The trap is it creates a mental pattern to condition you to accept paying interest on other purchases.
- deleted 4y ago
  [deleted]
- neon_electro 4y ago
  Well said, but I feel like practicing your first sentence makes it relatively easy to be good at avoiding the mental trap you describe.
epolanski 4y ago
Paying in installments requires you to have a secure stable income. You may not have one tomorrow. You may lose your job. You may go through a divorce. Maybe you have to move for months because your house has been flooded. You don't know what your tomorrow's financials look like. The only time that it may makes sense to pay installments if if the interests are really 0% and you have lots saved anyway. At that point..why not improve one's credit score anyway.
- e63f67dd-065b 4y ago
  > The only time that it may makes sense to pay installments if if the interests are really 0% and you have lots saved anyway. At that point..why not improve one's credit score anyway. BNPL providers typically provide 0% interest rates for longer that credit cards, which have 0% interest for anywhere from 3wks to 7wks (depending on when your statement closes relative to when the transaction settles).
chasd00 4y ago
if you can get a loan at 0% interest it's definitely in your best interest to pay that loan back as slowly as possible. The longer you wait the less you effectively owe as inflation does its thing. I'm 46 and still paying on my student loan, the interest rate is so low that (even in normal times) inflation outpaces it. I'm making money by paying it back over decades.

by yladiz 4y ago

christkv 4y ago

I think the argument is that its easy to get out of control and leave yourself exposed. If you have discipline then I don't see any problems. I might behov the industry to be forced to do more stringent credit checks before allowing it either by law or regulation.

Dalewyn 4y ago
I have no sympathy for adults (important distinction!) who have no discipline with their finances. They aren't children who literally don't know better. Those who do have financial discipline should not be inhibited for the sake of those who do not. Besides, /most/ cases of financial ruin aren't literal death. They are generally just very expensive and horrible-to-go-through life lessons.
- christkv 4y ago
  Sure but regulations are the to avoid them creating systemic risk by lending to dead beats.

kortilla 4y ago

It’s financially reckless. What if you lose your job?

Ultimatt 4y ago
You then pay off your outstanding debts if you think there is risk you will be paying out more in the near term... That's why you only carry debt when you could otherwise afford something. Literally thats the point. Realistically though its even better if you lose your job because you have the cash in the bank you would otherwise have sunk into an asset. I just quit my job to be self-employed and have a bit of a career break. Before I did I got a 24 month interest free credit card. If I suddenly have to pay for something really expensive like a new boiler or something, I can put it on there and I have two years to decide what to do, or get a job with zero additional cost. That's security more than it is a liability. I've had a perfect credit score and never paid for credit other than my mortgage interest. People who refuse to use credit out of some broken parental advice of "never carry debt" is far more reckless since you're ignoring an entire avenue of financial management for yourself. Absolutely don't carry debts you cannot afford. But everyone should abuse the fuck out of the credit system, and the institutions designed around fleecing people a lot stupider than you. The bar for credit company profits is set at people where money is like water through their hands, not people who know how to keep a personal budget in a spreadsheet.
- kortilla 4y ago
  You can’t pay it off if you weren’t able to afford it up front. You’ve changed the scenario from “I can’t afford the full cost but can afford monthly payments” to “I can afford this and am using monthly payments as an interest free loan”.
  - Ultimatt 4y ago
    Go read what I said, the premise was you can afford the item outright but it still doesn't make sense to if you have interest free credit available.
Rebelgecko 4y ago
Ideally you have an emergency fund so it doesn't matter. But compared to paying the cost up front I think you'd be better of using BNPL actually. You'll have more cash on hand to pay for necessities like food/rent, in exchange for a ding to your credit score if you don't have enough money left over to pay the monthly payments on the camera you use for your budding photography business

ivanche 4y ago

If you take 12 payments you, by definition, are in debt! It seems you are conflating debt with net worth - a person can have positive net worth and still have debt(s). Even if it is 0% interest you owe money to someone. Every debt is a risk. It may be smaller or larger, but it's a risk. It also normalises the behaviour of going into debt for buying depreciating objects which is bad by itself.

arlcode 4y ago

There is nothing inherently wrong with that but it's a lot more risky then saving up. Say after 10 months an unavoidable bill of $4k shows up and I got to pay it. If I'm saving up I can redirect that money. It sucks that I don't get the camera when I planned to but otherwise I'm fine. Under a BNPL plan I have no extra money to allocate and might have to dip into Credit (potentially with high interest). In short: Savings are fungible, payments are not. Studies show that huge percentage of the population doesn't have any savings. For them it's particularly dangerous to have more recurring bills.

pandaman 4y ago
Your method is just as risky - say after you've just spent 5K on your camera an unavoidable bill of $4K shows up? Now you have no extra money and have to dip into Credit (potentially with high interest). Your best strategy would have been to have $5K on hand and still use financing if the terms are favorable - it keeps your funds at steady level, allows for future planning and gives you opportunities to invest or otherwise grow your capital. And yes, people without savings pay for that, it sucks to be such people but they are paying regardless if you take advantage of the financing scheme.
- happyopossum 4y ago
  Then you sell the camera and pay off the bill. Sheesh - it's a camera, not a life support machine...
  - pandaman 4y ago
    I think you might be overestimating the liquidity of the used camera market a little bit.
    - Sakos 4y ago
      Does it matter? Even if he only gets half the price back, that leaves 1500 left of the debt he has to pay out of pocket. If he's paying monthly for the camera, he suddenly has a $4000 bill on top of whatever of the $5000 debt remains unpaid. I think I'd rather be in the former situation.

mozman 4y ago

Always spend other people’s money, especially at 0%. The trap is it creates a mental pattern to condition you to accept paying interest on other purchases.

deleted 4y ago
[deleted]
neon_electro 4y ago
Well said, but I feel like practicing your first sentence makes it relatively easy to be good at avoiding the mental trap you describe.

epolanski 4y ago

Paying in installments requires you to have a secure stable income. You may not have one tomorrow. You may lose your job. You may go through a divorce. Maybe you have to move for months because your house has been flooded. You don't know what your tomorrow's financials look like. The only time that it may makes sense to pay installments if if the interests are really 0% and you have lots saved anyway. At that point..why not improve one's credit score anyway.

e63f67dd-065b 4y ago
> The only time that it may makes sense to pay installments if if the interests are really 0% and you have lots saved anyway. At that point..why not improve one's credit score anyway. BNPL providers typically provide 0% interest rates for longer that credit cards, which have 0% interest for anywhere from 3wks to 7wks (depending on when your statement closes relative to when the transaction settles).

chasd00 4y ago

if you can get a loan at 0% interest it's definitely in your best interest to pay that loan back as slowly as possible. The longer you wait the less you effectively owe as inflation does its thing. I'm 46 and still paying on my student loan, the interest rate is so low that (even in normal times) inflation outpaces it. I'm making money by paying it back over decades.