Easy Finance Is Not Always Easy

It’s not a surprise to read about people racking up lots of debt on the mobile lenders.  People will always find a way to borrow if they are that way inclined.

What is interesting and relevant is that the lady has no idea what she bought or what it cost.

This is because the focus of the client in these case is to get the item, not what the cost (bar the initial price) is.  They have no interest in the long term price because that’s tomorrow’s problem.

When you only live for today, it’s easy to dump stuff on tomorrow.financial-planning

The way to avoid falling into the (self-inflicted) trap of borrowing for consumer purchases is to be very aware of today and tomorrow.

What I mean is:

  1. Be very clear about what your income is.
  2. Be very clear about what your expenses are – i.e. do a budget.
  3. In this budget have a clear breakdown of what is allowed for discretionary spending.
  4. If an item is over this, you cannot by it.
  5. Only buy things with cash, i.e. you have to save. And if you have to save, you have to budget an amount each pay to save so you can spend this money.
  6. have a goal for the future that is more important than borrowing more, i.e. buying a new car, a house, a holiday etc. it’s easier to save for a goal and not spend than to just ‘not spend’.

Doing this will mean you are less likely to wander into a shop and just borrow money, as you will be aware of the impact on your future if you do.

But let’s also get away from this nonsense of these companies ‘preying’ on people.  They don’t drag you into their truck/shop and you have to sign the dotted line to get the money/loan.

Yes, if they are not fulfilling their legal obligations on disclosure, sale of goods act etc., they need to be dealt with, but offering a loan at 25% is not illegal (its less than GEs standard rate btw), as long as you know its 25% and take it with no pressure or fraud.

as you can see from the article most of the companies have already written off much of what she owes them, which shows why they charge so much, to cover the cost of those who they never get money from (it also shows they need a better assessment process).

High interest lenders are a pain in the ass and I enjoy helping them lose money by cashing them out early, but they are part of the market and there is demand for them, otherwise they would go out of business.

The best way to run these people out of business and to lower their rates is for people to stop borrowing for items they should save for, and to live for today and tomorrow, not just today.

DUX Financial Services can provide some advice in this area if you need it.  Check with your Citizens Advice Bureau (CAB) and budget services as well.

By Alan Borthwick

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