So you’re browsing in an electronic store or on the internet at computers. Maybe you have been in the market for one or maybe you just stumbled along them by chance. Either way, you have eyed a computer system that is just too good to be true. It has everything you’ve ever wanted in a computer. It is chock full of memory on its larger than life hard drive, it has all your favorite programs preinstalled, and it even has the large screen you’ve always wanted. It is truly the cream of the crop when it comes to computers.

What’s the problem? What else but the price. Something so luxurious is bound to be expensive and far above any price you’d be willing to pay. In the event that something is beyond what you can afford, there are other options. You could ask your parents or a friend for the money, you could sell a kidney to pay for it, you could charge it to your credit card, or you could finance.

When you finance a purchase, you are essentially borrowing money to pay for it. It is almost like you are leasing it until it is paid for and then you can keep it. For example, let’s say this computer is $1,000 and you can only afford $500. You can pay $500 and finance the rest, or you can finance the entire purchase. This allows you to take home the computer today instead of having to wait until you have saved enough money at which time the computer might be outdated.

Before you make such a big decision, you need to understand why it’s such a big decision and what effect it can have whichever way you go. When you finance a purchase, you are charged interest. This is where they get you. When you buy a house, you might get anywhere from a 5 to 8 percent interest rate. This is not the case with consumer purchases. I know someone who financed a computer for about $600 and got a 28% interest rate. That is enormous! If they only paid $20 a month, a few dollars above he minimum required, they would be paying between $10 and $14 a month in interest for the first year. If they pay it at the minimum until it’s paid, they will have paid hundreds of dollars in interest!

This interest rate is even more than some credit card rates. If you just have to buy it now, check your credit card rate and compare it to the rate they give you and go with the lesser of the two. Better yet, save your money, put it into an interest bearing account such as a CD, and let it accumulate even faster. You will save a LOT of money.

By: Samantha Asher

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