Honestly a loan costs you more than you think. Most people don't understand interest or how the loan precess works. As an example take a typical car that costs $10K. Most loans are set up so that you pay the interest before you even pay the actual loan back. Now that $10K car that you just bought is financed at a resonable rate, say5%, you're not doing to bad. If you've got crappy credit like most do these days then you can get an interest rate as high as 24%. So let's do a little math th show you what you're up against.
If the loan is done as an anual interest rate then it means that the 24% is multiplied into the loan for every year that the loan is for. A $10K car at 24% for the first year you owe $12400 total. Now let's add the rest and it isn't pretty.:redface:
This means that for each year you multiply that initial $10K and it's subtotal by 1.24
for each year that the loan is suposed to be carried though. Average loan time is a 6 year note now so that the $10K car you bought will cost you$36352.15.
Plus it will be 6 years of maintainence, insurance, and registration.
You want to get a loan on your car so you can rebuild the engine and unless you're getting a 1% loan on it then it's just not a good idea. Any type of loan where the item in question can be lower in value or may be a volital comodity like a car just isn't a good idea at all. What they'll try to get you to do is go off some sort of payment plan so that they "can help you fit it in your budget". Sounds great, right? Just remember the total of that loan I posted above. That's a $500 monthly payment so you should be able to fit that in your budget, right?:biggrin: