Money
Debt and Borrowing
When Not to Invest, Clearing Debts First will Give Higher Returns
It is generally advised that everyone should invest, especially for retirement, but debts should be cleared first as this will be more profitable.
Whilst investing for retirement or other purposes is usually advised there are times when it is not appropriate. As Why Interest Rate is Lower on Savings than Loans explains, debts are more expensive than the returns available on savings and most sensible investments. So clearing debt should be the first investment.
Cost of Debt is Greater than Savings and Investment Returns
Why Compound Interest on Loans Causes Problems
Compound interest may help savers, and lenders, but it is the enemy of those in debt. This article shows why high interest rates often make borrowings unmanageable.
High Interest Rates and Low Repayments Make Clearing Debt Difficult
As has been shown elsewhere compound interest works for lenders in the same way but at a cost borne by borrowers.
Use Credit Cards Wisely to Avoid Debt Problems
Credit and store cards are a very easy source of credit but they are also very expensive. It is therefore not surprising their careless use cause so many debt problems.
Easy Credit and High Interest Rates Make Convenience Dangerous
Manage Borrowing and Credit Cards Effectively
Tips for Making Economical Use of Loans and Managing Debt
There are a few simple disciplines for managing borrowing so it does not get out of control and to make it serve the borrower rather than the lender.
To control debt and borrowing it is more important to consider the term of loans rather than seek to minimise monthly repayments.
How to Avoid Debt Problems, Match Loan Period to Purchase Life
Loan Period Wisdom for Reduced Debts
Problem debt is often caused by not matching the length of the loan with the life of the purchase. If loan lasts longer than the benefit then a replacement has to be bought and adds a new layer of debt.Loan Periods – Some Simple Questions
A fewer simple questions will guide the borrower to a suitable loan length.- How long will the benefit last or will the borrower enjoy the purchase?
- What is the life of the asset?
- How much value will the purchase retain over potential loan periods? Will it take the purchaser into negative equity?
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