Many people are concerned about taking on loans they can’t afford, especially if they have experienced a bankruptcy in the past. Unfortunately, many more people are not concerned about taking on loans they can’t afford. The latter group of those two is far more prone to bankruptcy. However, it doesn’t always have to be that way. There are alternatives to taking out traditional loans for big purchases. Of course, they aren’t as easy as your typical loan, but that’s why you pay those high interest rates, right? You can’t get money for nothing.
Pay Yourself Instead of a Lender
Now, clearly there’s a catch here. You have to already have the money. However, many people will take out loans for big purchases when they don’t really need to. If you take out a loan to pay $18,000 on a car, and yet you have $25,000 sitting in a savings account, are you making the most effective use of your money?
Instead of taking out a loan with a high interest rate, why not use your savings to pay cash for that car? It’s a big hit, right? Well, instead of paying off a loan every month, you can pay yourself back by paying the money that would go into a monthly loan payment into your savings account instead.
If you were signing up for a five-year loan of $300 per month (plus those high interest rates), you can now pay your savings account $300 every month for five years, and save yourself all the costs of interest.