Which payment method makes me or save me the most?
People are split on this issue and feel strongly one way or the other. This article will look at the pros and cons of each.
Back when interest rates on savings accounts were higher this was a no brainer. You should already have the money, put it in savings making 6% and get a 0% interest loan on the item (a car for example.) The problem now is that savings accounts aren’t paying much at all and if you hold the car note, even at 0%, for 4-6 years, there’s a bigger chance that in that amount of time you’ll either need to spend or foolishly spend the money in savings reserved for that car. Now when the bill comes due you don’t have the money anymore and it didn’t make you much interest to be worth it in the first place.
In today’s environment it’s probably better just to pay cash. You’ll have the pride of knowing you could do it, you did it, and you don’t have the headache of waiting for a future payment years from now.
If you have incredible discipline then go for the no interest loan. But don’t forget that every loan is another mark on your credit report (it depends on how much that score matters to you) and you can’t know the future so if something comes up and the cash is no longer available you’ll be on the hook for a lot of back interest.
If the loan has any interest charges to it at all then you should definitely pay cash. At today’s rates its simply not worth it.
The author writes for a variety of websites including the delonghi deep fryer which also has information on delonghi replacement filters.
This entry was posted on Monday, February 22nd, 2010 at 7:50 pm and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.