Finance

Danny1969

A Samsung QE49Q7FAM 49" OLED TV is about £1200 from most stores or you can buy it from Brighthouse on 156 easy payments of £23. 00 meaning a little bit of interest and you have now paid £3588  !! and there's people that do this .....

ronnyb

Ive never had any credit other than a mortgage which i paid off years ago. I buy everything cash and always been careful with money and consequently i'm reasonably well off now. It may sound like a good position to be in but i know i'm too careful and always have to have savings for that rainy day. I could afford a lot of things that i would like to buy but don't because i have this fear of being short of money. I've got 2 houses one of which i rent out and both cars are paid for though they're not flash ones. How some people can live with a lot of debt is beyond me but i sometimes envy this live for today mentality seeing them run around in big cars and taking luxury holidays.    

joeyowen

Wow!

Just looked... the guitar I got from Peach for £600 (on a 24 month 0%) is now £740.  If I had saved, I would be regretting it.

It can make a lot of sense

menamestom

The good thing at the moment credit is so cheap.  M&S loan, 2.9%.  I have a Sainsbury's credit card, 0% for 2 years with a 12k limit.  I have just got my house insurance quote through from the post office, £38.88 a month.  Sounds okay, but that is at 26.5% interest!  What's the point when I can get 0% credit and save £48 on one bill in the year.

The trick is just to be smart.

The only debt I have is a mortgage.  I need a car so I'll get a loan, but no way I'd pay dealer finance prices.

I thonk the problem is not so much finance as the modern way of looking at everything as a monthly bill.  i.e. I can afford that car which is £300 a month, with no though to the terms of final payments etc.   A phone only costs £50 a month for the latest handset, which ends up costing £1200 over the term including very expensive finance.

My summary, finance should be avoided unless absolutely necessary, but if you do use it, use some of the plentiful available cheap credit.

mart

Danny1969 said:

A Samsung QE49Q7FAM 49" OLED TV is about £1200 from most stores or you can buy it from Brighthouse on 156 easy payments of £23. 00 meaning a little bit of interest and you have now paid £3588  !! and there's people that do this .....

I see your point, but I’ve always felt this is the wrong way to look at it. You’re not paying £3588 - most people would shy away from that - you’re just paying a tiny £23 a month. At the very least, you’re not paying the £1200 upfront, which is the alternative, you’re paying small bits of money at times when you can afford it (or, at least, when you are more likely to be able to afford it).

Put another way, if you want to buy a £200k house, you take a mortgage and pay, what, about £600k in total. Sounds like madness, but we all do it, a) because it’s the only way most of us can buy a house and b) because you’re never actually paying that £600k in one go.

At the very least you have to figure in inflation and accept that the £600k needs to be valued over the lifetime of the mortgage, and so is not comparable with the £200k value at the start of the mortgage term. (How many guitars would that £600k buy at the end of the mortgage compared with at the start?) But I’ve always thought you need to factor in more than just inflation - it’s also about what you can afford - what proportion of your income, say.

Mind you, I’ve never studied economics, so maybe this stuff is all well-known and obvious to the experts. If so, forgive my neophyte ramblings.

LuttiS

mart said: 

Danny1969 said:

A Samsung QE49Q7FAM 49" OLED TV is about £1200 from most stores or you can buy it from Brighthouse on 156 easy payments of £23. 00 meaning a little bit of interest and you have now paid £3588  !! and there's people that do this .....

I see your point, but I’ve always felt this is the wrong way to look at it. You’re not paying £3588 - most people would shy away from that - you’re just paying a tiny £23 a month. At the very least, you’re not paying the £1200 upfront, which is the alternative, you’re paying small bits of money at times when you can afford it (or, at least, when you are more likely to be able to afford it).

I think this is what it's about.. people looking at the small picture.. sure £23 is peanuts for most a month.. but it's a little bit sickening when you look at the total cost..  And people think it's a good deal.. 

Danny1969

LuttiS said:

mart said: 

Danny1969 said:

A Samsung QE49Q7FAM 49" OLED TV is about £1200 from most stores or you can buy it from Brighthouse on 156 easy payments of £23. 00 meaning a little bit of interest and you have now paid £3588  !! and there's people that do this .....

I see your point, but I’ve always felt this is the wrong way to look at it. You’re not paying £3588 - most people would shy away from that - you’re just paying a tiny £23 a month. At the very least, you’re not paying the £1200 upfront, which is the alternative, you’re paying small bits of money at times when you can afford it (or, at least, when you are more likely to be able to afford it).

I think this is what it's about.. people looking at the small picture.. sure £23 is peanuts for most a month.. but it's a little bit sickening when you look at the total cost..  And people think it's a good deal.. 

Your right that's what they play on .... but it's actually £23 a week which is around £100 a month.

Nitefly

Danny1969 said:

LuttiS said:

mart said: 

Danny1969 said:

A Samsung QE49Q7FAM 49" OLED TV is about £1200 from most stores or you can buy it from Brighthouse on 156 easy payments of £23. 00 meaning a little bit of interest and you have now paid £3588  !! and there's people that do this .....

I see your point, but I’ve always felt this is the wrong way to look at it. You’re not paying £3588 - most people would shy away from that - you’re just paying a tiny £23 a month. At the very least, you’re not paying the £1200 upfront, which is the alternative, you’re paying small bits of money at times when you can afford it (or, at least, when you are more likely to be able to afford it).

I think this is what it's about.. people looking at the small picture.. sure £23 is peanuts for most a month.. but it's a little bit sickening when you look at the total cost..  And people think it's a good deal.. 

Your right that's what they play on .... but it's actually £23 a week which is around £100 a month.

It certainly isn't a good deal, but for lots of folks (e.g. those with poor credit history, etc) it's the ONLY deal.

mart

Doh, I should’ve realized it was £23 per week not per month!

Yes, people look at the small picture, but I think that’s reasonable. If you’re paid weekly and you can afford £23 out of your wage, then that’s really what matters. 

Besides, like @Phil_aka_Pip pointed out, if it’s the difference between an affordable £23/week payment and having a tv, or saving up and not getting a tv for another 3 years, then why wouldn’t you have the tv sooner? And picking up on the point @joeyowen made, you might not be able to afford it after you’ve saved, since the price will have gone up.

Sure, if I can choose between paying £1200 today, or paying £3588 today, then I’ll choose to pay £1200. But that’s not the choice on offer, since the £3588 is later and, hence, less in real terms. 

Funny thing is, although I’m arguing so strongly that there’s a place for credit, I generally try to avoid it myself. I’ve paid off my mortgage even though it’d save me more to put the money in savings (my mortgage rate is stupidly low). But I don’t, because I’ve been brainwashed into the fear/distaste/suspicion of being in debt.

stickyfiddle

@mart isn't the point that noone needs to spend 1200 quid on a TV, so spending 3.5k on one when you can only afford 20 quid a week is madness? 

I'm hesitant to make value judgements around whether someone who is relatively poor should spend their money, but if they settled and got a TV for 500 they'd make themselves massively better off in the long run, which is better for them, and taxpayers, and pretty much everyone else except the company offering the loan for the tv.

LuttiS

I was always taught to live within my means.. if I need credit it usually means it's not within my means. 

Going with the TV, @stickyfiddle has a point.. and buying a cheaper TV would be the answer, but based on my assumptions and complete anecdotal evidence people will still go for the expensive one

Snap

Here's another view of credit.

Say you have 100k cash and have the option to buy a property that costs 80k. You can get a mortgage for 1.5%. Lets say for argments sake you can fix this rate for the term of the mortgage, and that the amount you are going to borrow is 80k.

The most obvious easy option is to buy it cash, but the question I'd be asking is - can you make more than 1.5% a year on that 80k yourself? If the answer is yes, borrowing is the right answer (assuming you can afford the mortgage etc).

You could apply that rule to all credit - does it add up to borrow it over the term of the loan? Credit can be very useful if you use it sensibly and to your advantage, but it take a bit of savvy and inclination. Its the principle on which most business have been made - you borrow to speculate and accumulate.

Credit cards - I use one for everything when I am abroad. Halifax Clarity - all transactions are without service charge, including cash at ATMs. Paid off as soon as I get home. ANother layer of protection is that if I get frauded on it, at least its contained within the credit limit of the card and isn't accessing my personal bank account. I never take cash abroad, jus the Halifax card, and then get a bit of cash out of the ATM at the airport, and then as I need it during the trip. Minimal risk.

Also, everything you buy on a credit card is protected and warrantied. I bought a kitchen on one- the company went bust, and when I later had a problem with the kitchen, I claimed the whole cost back from the credit card firm.

CabbageCat

mart said:

Danny1969 said:

A Samsung QE49Q7FAM 49" OLED TV is about £1200 from most stores or you can buy it from Brighthouse on 156 easy payments of £23. 00 meaning a little bit of interest and you have now paid £3588  !! and there's people that do this .....

I see your point, but I’ve always felt this is the wrong way to look at it. You’re not paying £3588 - most people would shy away from that - you’re just paying a tiny £23 a month. At the very least, you’re not paying the £1200 upfront, which is the alternative, you’re paying small bits of money at times when you can afford it (or, at least, when you are more likely to be able to afford it).

Put another way, if you want to buy a £200k house, you take a mortgage and pay, what, about £600k in total. Sounds like madness, but we all do it, a) because it’s the only way most of us can buy a house and b) because you’re never actually paying that £600k in one go.

At the very least you have to figure in inflation and accept that the £600k needs to be valued over the lifetime of the mortgage, and so is not comparable with the £200k value at the start of the mortgage term. (How many guitars would that £600k buy at the end of the mortgage compared with at the start?) But I’ve always thought you need to factor in more than just inflation - it’s also about what you can afford - what proportion of your income, say.

Mind you, I’ve never studied economics, so maybe this stuff is all well-known and obvious to the experts. If so, forgive my neophyte ramblings.

An inability to measure relative quantities of money is the reason stupid people stay poor. If one paid for the TV up front instead of getting the loan one would be £2400 better off after three years. I do not begrudge Brighthouse - they take advantage of stupidity and I see no problem with stupid people suffering for their refusal to stop being stupid.

The sums are very easy. Anyone who can't do the maths should probably not be in charge of their own money.

Danny1969

The sad thing about poor people buying from Brighthouse is a lot of the time the product, be it a Playstation, laptop or phone etc will be dead before they have finished paying for it. 

munckee

Danny1969 said:

mart said:

Danny1969 said:

... 
@boogieman what you do is sensible and buying on CC and then paying off completely can offer benifits and protection but ultimately your not the kind of customer CC companies want, they aren't gonna make anything from that they really need people to not pay the money back until they have made the interest 

Do you think there’ll come a time when CC companies try to penalize those of us who pay off the whole balance each month?  

At the moment the cost of your transactions are paid for by the customers who are  paying interest .... that will just continue I think 

It does if you care what credit limit you are offered, having credit and paying it off over a longer period improves your credit score, people who have full credit cards get offered bigger limits.

Sporky

munckee said:

It does if you care what credit limit you are offered, having credit and paying it off over a longer period improves your credit score, people who have full credit cards get offered bigger limits.

I've always paid my credit cards off in full every month (barring at a guess three times when direct debits failed or similar), and when I asked for a higher credit limit it took a few seconds - that was to go up by a factor of five to pay for the workshop building, so not a trivial increase.

Meeting payments is, I understand, more important to your credit scores than paying interest. The credit card companies get a %age transaction fee every time you use the card so they're not totally reliant on interest payments, though people who pay interest do contribute more profit.