There is always a new appliance or gadget launched every now and then. However, keeping up with the latest trend is not a cheap habit. Likewise, stuffing your home with expensive appliances may leave a hole in your pocket. Saving up is still the best option if you want to purchase these things. Nevertheless, there may be situations that will urge you to buy on credit. Things such as the need to furnish a new house or to replace a broken oven will force your hand in doing the purchase.
This is where appliance loans come in. Most banks and other financial institutions will offer this type of service. These financial institutions will not bother with how you use the money. You may use it to repair or purchase appliances at home. Therefore, it may seem that an appliance loan is your best friend. In truth, if you are not careful, it will land you into debt.
For your information, the disadvantages of appliance loans are as follows:
- High interest rates – Financial institutions make money through charging interest rates on loans that you make. Unlike if you pay in cash, you will need to pay the selling price plus interest on the appliance you need. In addition, the monthly add on rate stated may not be the exact amount you are going to pay. In addition to the prevailing interest rate, you may also need to pay a processing fee in order to get the money. This may mean that the appliance will cost you more than the stated price. However, you may not notice this as the computed monthly charge will be relatively small.
- Prepayment fees – Like many other loans, a prepayment fee may be applicable should you want to pay for the loan in advance. Instead of getting the best deal when you purchased the appliance, you will be charged for paying the remaining balance. In addition, a longer loan term may mean that you will be in debt for a longer period of time.
- Increase in electric bill – The purpose of getting this type of loan is primarily to purchase appliances needed in the home. However, at times it may be used simply to satisfy a want. In this case, an appliance loan further becomes a liability. There may be a surge in electric bills when there are excessive appliances used in one’s home.
- Unnecessary spending – Availing of an appliance loan may indirectly foster unnecessary spending habits. The tendency of overspending becomes a reality when money becomes readily available. The ease of acquiring an appliance loan at reasonable rates may lead to frequent lending in order to satisfy unnecessary wants.
Thus, although an appliance loan may be beneficial in some ways its disadvantages should not be overlooked. The pros and cons of availing this product should be weighed in prior to deciding on a purchase. Furthermore, one should cultivate the practice of saving in lieu of the availing of loans when buying one’s wants.