Consumer debt: still paying for the holiday
Lesson 7 of 11 in our free Good Debt vs Bad Debt guide: a 5-minute money game with the key points below.
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Questions you'll answer
Some car finance deals end with a large final 'balloon' payment. What does that mean?
Quick facts
- A new phone → Loses value fast. Worth a fraction of its price in a couple of years.
- A new car → Loses value fast. Cars lose value fastest in their first years.
- A qualification that leads to a higher-paid job → Holds or grows. Its value shows up as income, if it leads somewhere.
- A designer sofa → Loses value fast. Second-hand furniture sells for far less than new.
- Fact: “Store cards often charge higher rates than many other ways of borrowing.” — The 'X% off today' bait can cost far more in interest later.
- Myth: “Spreading a holiday over a year of payments makes it cheaper.” — Spreading costs usually adds interest. Saving up first is the cheaper way.
- Fact: “Saving up first for a want is usually cheaper than borrowing for it.” — You earn interest instead of paying it.