Funny about Money

The only thing necessary for the triumph of evil is for good men to do nothing. ―Edmund Burke

All Loans Are Not Created Equally

The New Ride of Funny's Dreams. ca 2013: $17,500

The New Ride of Funny’s Dreams. ca. 2013: $17,500…plus interest

It doesn’t matter if you’re Donald Trump, all of us have to borrow money sooner or later. There are a bunch of online personal finance gurus out there who might tell you different, but there just isn’t a way to get through life without borrowing, unless you keep your ambitions well beneath your earnings. That may sound like something that is very possible, but is it really? We’re talking about putting off a home or auto loan, potentially even going without higher education. Not many people can afford to pay for those things out of pocket, so borrowing would be necessary. Are you really able to skip out on those things, just so you don’t have to borrow money?

I’m going to guess not. If you’ve accepted borrowing as a part of life, at this point, it’s important not to just start borrowing willy nilly. Not all loans are created equally. There are multiple aspects to consider for each loan, even beyond the main details that we always think about. Here are some things to consider.

Price. There are people who have loans who don’t even understand what an APR is. An APR is Annual Percentage Rate. That’s the kind of name that doesn’t tell you anything about the thing it represents, so we’ll dig a little deeper. The APR of your loan is, basically, the price that you pay for borrowing that money. It’s a combination of interest and fees. Interest is a specific percentage rate that you’ll pay each year, based on the base amount of money you are borrowing. There will also be fees associated with each loan, for originating the loan, for processing, for whatever the lender dreams up.

These loans can have APR of anywhere between 1% to 35%, sometimes more. The latter is extremely high, but there are other loans that are meant to have extremely short duration, and carry WAY higher interest and fees to compensate. Verymerryloans.com has a bunch of examples you can check out, and you can get a quote if you like. It’s best not to take on loans that have high interest, as these will be more expensive in the long run, and will give you a higher chance of defaulting. If you default, you’ll likely incur way more interest and fees in the long term. You should also not take on loans that penalize you for early repayment. This sometimes happens, when a shady company wants to lock their customers in for the long (Expensive) haul.

Duration. This is the other major factor when considering a loan. How long will you have to pay off the loan? As mentioned above, is there any penalty for early repayment? There are tons of loan terms, from a week to thirty or sixty years. Some businesses take on loans which go farther than that, and world governments can pay in near perpetuity.

These are the two factors to consider when taking on a loan. All terms associated with your loan will pertain to either Price or Time, so if you’re having trouble understanding said terms, figure out which category each belongs to, then work out what it’s talking about from there.

—JB
Image: OSX – Public Domain

Author: funny

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4 Comments

  1. She (the new vehicle) is a beauty! I’m guessing the “Dog Chariot” has “bought the farm? What did it in? If you say “Mother-board” …. I swear I’m jumping into traffic!

    • Ha ha!! I haven’t had time to tell the latest Tale from Hell, have I?

      In a nutshell: yeah, I need to buy a new car. Right now I’m carless in Gaza; Chuck the Wondermechanic will get the DC operative; from there it’s straight to the car broker to look for a used Venza or Hyundai Santa Fe.

  2. Vacation???? See what happens when you take a little time off!! LOL….Whatever happens the DC served you well as has Chuck….But please know you’re living my nightmare….Your car took a crap….and now you HAVE to do something….OR ride a bike. Good Luck in your search….I misunderstood…I saw the pic above with the price and just assumed you had “pulled the trigger”… Can’t wait to hear the DC story …when you get back from vacation….

    • Well, the hammer is cocked. I’m prequalified for a 1.9% loan that will cover used cars back to 2012 and I’ve called the car broker.

      In a way, you can see why people have two cars. If one conks out, you at least can get to the damn grocery store!!! Chuck still hasn’t got the DC running, but my neighbor drove me to the store last night, so there’s enough food in the house to last for awhile.

      Meanwhile, Charlie the broker (not the golden retriever) is looking for a Venza or a Hyundai Santa Fe. I expect he’ll surface in a few days with somethingorother. Hope his spies can take the Chariot as a trade-in. The image just got stuck in there to decorate a random post on loan rates.