2008: Do you know what kind of loan personality you are?

By | December 28, 2007

Do you know what kind of loan personality you are? Have you even stopped to think about why you borrow loans? This article examines five loan personalities listed below. So read and choose which kind you are. Read the description then decide which kind would be better!

Are you the type that is …

* a. always borrowing money?
* b. occasionally borrowing money?
* c. seldom borrowing money, except for big ticket items?
* d. you only borrow money to increase your wealth?
* e. you never borrow?

“I’m always borrowing money: from the first day of the month to the last, and repayments are frequent, expensive and frustrating.”

Attitude: If you are always borrowing money, then perhaps you are facing cashflow problems. You are using regular loans or even cash advances to finance your daily life, such as shopping, leisure, bill paying, etc, perhaps through short term financing options. These short term financing options tend to be the least financially attractive, as they aren’t secured, interest rates are much higher than other options, and are costing you a LOT more in interest payments. More likely, you are also probably behind in payments in one or more of the cards or loans, thereby incurring penalties, even higher interest rates, or worse.

Challenge: Obviously, you need to start somewhere and control the amount you are spending on loans, by cutting some costs, paying off the most expensive cards/loans, and using more of the leftover cash to finance regular bills. Cut your expenses: go to http://investorblogger.com/loans-and-rates-four-ways-to-save-money-on-your-mortgage-or-personal-loan

“I usually borrow money to pay for things like Christmas, vacations, car repairs, luxury items, and so on. It’s convenient to borrow, and I usually repay on time.”

Attitude:If you are occasionally borrowing money, then perhaps you aren’t always being the most careful in your shopping habits. When you see something that is a little more expensive than you can afford right now, you are splurging on a short term loan or store finance to take the item home. While such loans are sometimes a good solution, chances are you may not be so informed about the different ways you can cut a better deal. You may even be in too much of a hurry to get the LCD TV into your living room, not realizing that the extra warranty and 5 year payments may add 50% or more to the cost of your TV.

Challenge: Read the agreements, do the math, and then decide before you sign on the dotted line how much any items you are buying are REALLY worth to you. You may find that you can Refinance your current mortgage (as we did) and save a great deal on your payments every month. Or if you buy a TV and you’re still paying it off in two years time, then you have to ask yourself: “Could you have saved up the money, paid cash, bought a better quality TV, and have 0% additional costs if you had waited only six months?”
To read more about this: go to http://investorblogger.com/lcd-tv-vs-credit-card-debt-is-it-really-worth-12-years

“I only borrow for really big items or services that I can’t budget for from my regular income or savings: typically, new cars, houses, house renovations, weddings, and so on. I repay as quickly as possible to cut the interest payments and I always shop for the best loans.”

Attitude: Borrowing money is a means to enable you to purchase services or items that add value to your wealth or to your life. You tend to shop for loans, like Mortgage Loans or Car Loans, and will probably spend as much time shopping for the loan as well as the item or service itself. You tend to see things in the bigger picture, so you pay attention to things like the length of the loan term rather than just the minimum payment. You are also more likely to read the agreement, watch for additional penalties and costs (extra insurance, for example), and will repay on schedule to avoid further expense.

Challenge: Your challenge is that your savings amount isn’t really keeping up the with the changes in your life situation. Perhaps you’re not budgeting properly, or your budgets aren’t based on realistic expectations about your current situation. For example, if you are changing jobs, and you need money to renovate your house before you sell it, did you anticipate this expense when you decided to relocate? For more about mortgages: go to http://investorblogger.com/mortgages-a-chain-around-your-neck-or-the-shoulder-of-a-giant

“I only borrow money to increase my wealth. So I borrow money to invest in my business, or to invest in my real estate.”

Attitude: You sometimes also borrow money when there is a sure fire way to earn a return, such as through 0% credit cards or similar. If you do borrow money for a business, then take tax deductions for the expense, and get the most returns possible. Likely you see using other people’s money (OPM) as a tool for you to get ahead personally without risking your own wealth. This act of leveraging your assets will also allow you to make extra returns on any money you do invest in any project.

Challenge: Getting other people involved in your borrowing situations can be a help as much as a hindrance. You really need to understand the kind of people who are lending to you, what drives them to lend, what risks they are taking, and how they will react if things do go wrong. And sometimes, they do!
To read about this: go to http://investorblogger.com/buying-a-house-saving-for-the-deposit-it-does-have-advantages

“I simply never borrow money. I never have. I don’t now. I never will.”

Attitude: Either you don’t have enough money to buy things you want or need. Or you must be hugely loaded. More likely it is the former. As such, you are missing out on one of the greatest inventions of mankind: the ability to borrow or lend. Together these have been responsible for most of the success stories in the Western world over the last 2500 years. What are you thinking? Are you afraid that borrowing money will in some way diminish your power or freedom?

Challenge: In this situation, perhaps you are being unrealistic about your own situation or your ideals or even your own future. Borrowing money appropriately isn’t a curse, it’s a privilege and a huge benefit allowing us to own things that previous generations couldn’t even dream about. Or perhaps you are scared of the problems that borrowing money brought others? Then you need to examine carefully what it is you are scared of, and deal with that. Otherwise you are condeming yourself to a difficult life in a world that relies on borrowing and lending. So how do you decide? Go to http://investorblogger.com/difficult-decisions-so-how-do-you-decide

So what is your attitude? What kind of person are you? How would you define yourself in relation to borrowing?

update: This article was originally posted as an article, but now I’m posting it here in as a longer version of an earlier post. As an article, it was largely ignored, let’s hope as a post, it’s more useful!


InvestorBlogger regularly blogs about all things finance, money, tech and blogging at his blog (http://investorblogger.com) You can join him there daily and keep uptodate with his feed, too, as he explores the world of money in his “Random Walk to Wealth”.This article is (c)2007 by InvestorBlogger.com but may be used as follows:

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Author: InvestorBlogger

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