GUEST POST from Don – Loans

WHY LOANS?

Whose money is it anyway?  If it is mine I can use it ONCE any way I want.  But if I loan it to someone else I get to use it again and again.  That’s the concept of a savings account or an IRA.  Or if I use it to start a well-researched business it can give me an income for life.  Some foolishly believe that they can use someone else’s money any way they want.  It isn’t long before they find themselves in a financial box where payments steal future opportunities.  Don’t confuse “Business” loans with “Personal” loans.  Business loans can help a business invest in space or equipment which allows them to expand income potential.  

Personal loans seldom work that way.  If done right buying a house might work that way.  In the LONG RUN it can be far cheaper than renting.  However, buying too much house, or buying a house in the wrong zip code can cost you big.  We have owned 3 houses.  Actually the bank owned most of our first house (we owned the basement stairs).  We were able to pay off the second.  Now we can enjoy.  Even our first house was a bargain however, since we would have spent only a little less to rent.  My point?  Working to get out of debt has allowed us to invest more and investing has allowed us to use our money multiple times instead of ONCE.  The worst situation is where you don’t even get to use your own money once (that’s what happens when you take out a loan or have an unpaid balance on a credit card).

You can use your money Less than Once, Only Once, or More than Once.  How you view loans may determine which.

So, let’s talk about Personal Loans of various kinds:

First, why?  I’ve looked into buying a second car.  There are times we need a second vehicle like when our vehicle is in the shop.  But if we did it right now we would have to take out a car loan.  We’d be paying interest on a depreciating hunk of metal and plastic.  That is not appealing.  So, for us, the plan is to save up the money first.  That’s not the fun way, but it is the best way.  If we can afford a car payment of $400, then we can surely afford to bank $400 every month.  It will save thousands in payments.

Second, when?  Everyone loves NOW.  We are Americans after all!!  Americans get what they want WHEN they want it.  But that’s not what a SMART American does.  A smart American realizes that NOW means someone else gets his or her money through interest.

Third, how?  We get taken advantage of by every financial loss program available (loans).  He gets a loan against the equity (free-and-clear value) of his house (HELOC) and volunteers to make two house payments.  She gets a loan against the “credit line available” of her credit card (and then volunteers to not pay the entire bill when it comes due).  Students take out student loans and parents take out Parent Plus loans for the same schooling.  It seems that few plan ahead well (We didn’t either and it cost us).  “Twelve months same as cash” seems like a great deal (get it NOW, and pay later).  It’s not a great deal.  Read the small print on those loans.  The interest IS accruing, but will be waived if paid in full BEFORE 12 months.  The interest rate can be as high as 30%.  (If you ever sign up for one of these, pay it off in 10 payments or less.  The program is set up to screw you over because often the 11th (and certainly the 12th) payment is MORE THAN a year after the agreement date of the loan!  If you don’t pay attention they are going to get a windfall of interest from you.)

Fourth, where?  Everywhere!  The furniture store will sign you up for their own credit card and give you $25 off that loveseat.  The dentist will sign you up for something like RXCredit.  The grocery store will allow you to use your credit card even though you couldn’t pay off the balance last month.  The gas station, the mall, DoorSmash, the people at the craft show, the restaurant which charges you $55 for a 14 oz steak dinner, literally everyone will allow you to go into debt if you buy their products.  They don’t care that the interest on your purchase over time will cost you thousands of dollars.  They don’t care that next year you won’t be able to buy their cute crafts because you’ve gone bankrupt by buying everything this year on credit.  The only person who CAN stop this process is you.

Finally, who?  That’s what I just said.  YOU.  You have to find the place in your life to say “No!”  What if you said “No!” a couple times a week?  That would be over 100 times a year that you refused to pay interest on items you wanted or needed.  Let’s say you cut back on purchasing things on credit by $1,000 per year.  That could save you as much as $240 in interest payments next year ($20 per month).  Realize what $20 is … that’s half a tank of gas, or a hunk of steak to burn on the grill … every month.  

Hmmm!  That’s my money!!!  I’d love to use every dollar MORE THAN ONCE.  The only way to do that is to pay off those loans, invest instead, and enjoy the interest.  If I can’t use it MORE, I’d prefer to use it at least ONCE.  One thing I never want to do is take out a loan that allows other people to use their money more than once because I’m paying interest to them.  That’s my money!!!  

Copyright 2025 Donald Whelpley

[PLEASE NOTE that Don is always open to discussing the thoughts and opinions he shares here and welcomes comments as shared in the comment section. He doesn’t use other social media platforms and won’t see whatever you’d like to share with him if you post it elsewhere.
ALSO, Don is always open to offer his thoughts on various topics. If you have a specific request, you can let him know in a comment; he reads – and replies to – them all. ~ Sherry]

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