5 Of The Worst Things To Finance
We are not here to judge, after all, we are here to help you finance whatever you want. That being said, some things are smarter to finance than other things. Here are some things that you might want to think twice before financing, because it does not always end up well.
Boats
Boat ownership seems like a good thing, but it is not for everyone. It has been said that the two greatest days for a boat owner are the day they buy their boat and the day they sell it.
A boat purchase is even more regrettable when it is financed. This is an asset that is much harder to repossess for a lender. That mean that if a borrower fails to meet their obligations, a lender will have a much harder time reclaiming their losses. These risks are passed on to the borrower which translates into a higher interest rate than other loans.
Boat buyers often make their purchases impulsively and tend to disregard the higher financing costs. If you are considering a boat purchase, think long and hard about loans and consider the alternatives first.
Boat Financing Alternative
There are two great alternatives to boat financing.
One is to not finance at all and turn to the used market. People tend to change their minds fairly quickly after buying a boat. This means that there are plenty of boats on the used market for a fraction of the cost of new. You can simply save the money that you need and take advantage of one of the many used boat deals.
Another option is to look into a boat rental club. These are organizations that have dozens or even hundred of boats that they rent to their members. You pay one monthly fee, usually a little over $500, and get unlimited access to boat rentals. The benefit here is that you get to have a boat whenever you like, but you avoid all of the hassles of boat ownership. No maintenance, storage or maintenance charges. You can also rent various styles of boats. Anything from bass boats to pontoon boats to ski boats.
Vacations
We all have a dream vacation in mind and for most of us, it remains a dream. Others turn to financing to make their dreams a reality.
There are many problems with financing a vacation. First, you have the fact that it would be an unsecured personal loan. Even with good credit, the interest rate would be high on this type of loan.
You also have the fact that you will have nothing to show for the loan once the money has been spent. Sure, you have your memories, but this is not an asset that you can sell.
Vacation Financing Alternative
Instead of financing a vacation, save up the money and vacation within your means. If you can not save up the money for your vacation within a 6 month period, you are probably trying to live outside your means. Downsize your vacation plans and make them reasonable for your income level.
Pets
Pet financing has become increasingly popular over the last few years. This is largely due to the increase in pet prices. Pure bred dogs have increased substantially in price and a new type of dog, the “designer pet” has been created. What breeders do with designer pets is combine two breeds to form a new one that they sell at inflated price. It could be a combination of a beagle and a pug or a golden retriever and a poodle. Whatever the case, consumers want them and they are expensive.
Financing a pet is not the best of decisions if you could not otherwise afford a pet. A pet will require additional money besides the purchase price. If you have to finance the initial costs, will you be able to pay for vet care, proper food and boarding expenses?
Pet Financing Alternative
A good alternative to financing a pet would be to adopt one. The animal shelters are overflowing with animals that need a good home. For a few hundred dollars, you could give one of these animals a new shot at life.
Adoption not only saves you money, but also time and energy. These dogs will likely be past the destructive puppy stage and will often be house trained.
Household Expenses
When money is tight, people often turn to financing in order to make ends meet. This typically means a payday loan, but these loans often do not work out well for the borrower.
Payday loans, if used responsibly, can be a good tool but people seldom use them in a responsible fashion. To use one of these loans responsibly, you should know that you will have enough money on payday to both pay back the loan and meet your other expenses. Most people do not do the planning and therefore have to renew their payday loans, paying a new set of loan fees.
Household Expense Financing Alternative
A better option than a payday loan would be to simply negotiate with your creditors. These days, creditors are more willing than ever to make arrangements with their customers. They know that once someone defaults, it is very hard to collect any money. This means that keeping you current is a much better idea, even if they take in less money over the short term. If you find yourself coming up short on money for bills, call as many of your creditors as you can and try to lower your payments.
Weddings
Weddings have gotten out of control over the last few decades, likely as a result of reality TV. People see these over the top weddings and think that a simple wedding would just be a failure.
What this has led to is a growth in people financing their dream wedding. With an average wedding now costing over 20,000 dollars, this is quite a bit of debt for a new couple to take on.
Getting into debt at the beginning of a marriage is a very bad thing. As a young couple you are unlikely to have a substantial income and debt can limit the ability to save for things like a down payment on a home. Debt also puts stress on a marriage which is something that newlyweds struggling to find their way do not need.
Wedding Financing Alternative
A better option than financing a wedding would be to put aside your preconceptions as to what a wedding should look like. Determine what you can afford and plan a wedding within your means. This might mean limiting the size of your wedding, choosing a cheaper venue or maybe even eloping. Whatever the case, you will still have the good memories and a better chance of having a strong financial future.
