Too many people finance things in today’s loan-happy world that we live in.
By signing up for financing or paying for a purchase with a credit card, you may think that item is more “affordable” due to the fact that you aren’t paying for it with money that you already have.
And, just because the monthly payment seems doable, it doesn’t mean that’s best for you. Debt can lead to stress, a paycheck to paycheck lifestyle, delayed retirement, and more.
No one wants to live like this, especially if there are other ways around it!
Just because other people may be buying stuff, that doesn’t mean they can actually afford it and/or that it’s a good decision for you to follow in their footsteps. I see that as a reasoning for why people go into debt all of the time. “Well, so-and-so just bought a new car, so I can too!”
Side note: Of course, there are always exceptions to the rule. If you know how to take advantage of certain financing offers, then you may be able to come out ahead. However, if you know that you are not good at handling credit cards and debt, then it may be best to avoid them completely and to not finance the items that I have listed in this blog post. This article is targeted towards people who take on debt in order to “afford” and purchase the service/products listed below.
Financing things can lead to a never-ending debt cycle, where a person is constantly in debt and struggling to reach their financial goals.
Falling into debt over and over again can lead to insane amounts of stress, unhappiness, sadness, and feelings of hopelessness. No one wants to experience these feelings.
With all of that being said, some of the things people finance just blow my mind.
If you can’t afford a purchase, you should really think about other options before taking on debt. There is almost always a better way to afford something than to take on high-interest rate debt.
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Here are six things that people finance that leave me speechless:
Gifts.
Yes, people finance gifts all of the time for holidays, birthdays, etc., and this is just not a good idea.
Gifts are not something where you want to take out a loan in order to “afford” it – that’s not what giving a gift is about! It’s about the thought, and you don’t need a loan in order to show that you care about someone.
Dogs and cats.
Yes, some people may have to finance a pet for a medical reason (such as a guide dog) or something else, but what I’m talking about here is a person taking out a loan to purchase a regular family pet.
Don’t get me wrong, family pets are great!
But, you don’t need to go into thousands of dollars of debt to see that happiness.
There are many pet stores that sell puppies and kittens that let you take out pet financing on them in order to “afford” them.
Monthly payments are usually a few hundred dollars, and because so many people can’t say no to a cute little puppy or kitten, they bring their new furry friend home, with a lot of debt.
However, this is a disaster because, sadly enough, too many people do not read the fine print in the pet financing terms. Also, when you consider that people are actually taking out a loan, it means they most likely can’t afford the pet in the first place.
When researching the interest rates on pet loans, I found rates from around 36% to 150% interest on pet financing. That’s just crazy!
You can learn more about pet financing in Getting A Loan To Buy A Pet Is Ridiculous.
Furniture.
When we first moved to Colorado (before RV and boat life), we did some major furniture shopping.
The salesman kept saying that we could just finance everything so we wouldn’t have to feel the pain of spending that money all at once.
This is a horrible idea, and I cringed every time he mentioned it!
Furniture can be quite expensive, and it can be very easy to have a large bill after leaving a furniture store. No matter how enticing those furniture financing offers may be, please remember that you will eventually have to pay for the full cost, including interest. Too many shoppers get caught up when thinking about the monthly payments, but the full cost is what’s important.
Vacations.
I bring this true story up a lot, but it is one that still shocks me every time I think about it. I know someone who used their student loans to pay for vacations, and they even bought a few timeshares with their student loans.
This is a horrible idea!
This person isn’t alone as many people finance their honeymoons, family vacations, and more.
A vacation is supposed to be that – a vacation. I can’t imagine relaxing on my vacation knowing that I would be paying interest on it for months or years to come.
There are many ways to have an affordable vacation without any debt. I recommend checking out my post How To Save Money On Hotels And Go On More Vacations for more information.
An engagement ring, wedding, etc.
Getting married is a huge step in a person’s life and weddings can be a lot of fun, but it is not worth it to start out your new life with a ton debt. Wedding debt can cause arguments, stress, financial problems, and more.
Weddings can be expensive or affordable. A wedding can be done on any budget, no matter how low your budget may be. Remember, you can get married for just the cost of a marriage license!
Weddings can be great, but taking out a loan to afford a big wedding is something that most people end up regretting.
Related: How To Save Thousands On An Engagement Ring
Clothing.
Many clothing stores now offer credit cards. They lure you in with a free item, $25 off, 5% off, or something else that is relatively small.
If you are not good with credit cards, please ignore these offers! That small reward is not worth the trouble you may find yourself in down the road.
Clothing never needs to be financed. If you’re in need of clothing, you can always visit a thrift store for the items you need. However, I don’t know of many instances where a person would be so desperate for clothing that they would need the debt that goes along with it.
What things do you find ridiculous to take out a loan for?
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Mike - Budget Kitty says
When we first got married we financed our furniture, but that was a special deal where we paid zero interest as long as we paid the full balance in something like 6 months or a year. So instead of paying it all upfront I just made monthly payments and walked away paying no interest. You do have to be careful though because if you mess up and don’t pay it all off you’ll be hit with all the interest charges. Staying organized and making the regular payments is key.
Michelle Schroeder-Gardner says
Yep, that’s completely different.
Freedom 40 Plan says
It’s all ridiculous. But we have so many people who just want to keep the party going, can’t stand to actually wait and save for a bit, and unfortunately the banks will let them. Another common item people finance would be consumer electronics, like bug screen TVs. I’m sorry, but if you can’t afford to buy a TV, then don’t buy the stupid thing until you’ve saved up the money for it!
Michelle Schroeder-Gardner says
Yeah it’s crazy, especially with how affordable TVs are these days!
Jason Butler says
In the past, I was that person that financed gifts and trips. As I’ve gotten older, I’ve gotten wiser. It also doesn’t help to make more money.
Michelle Schroeder-Gardner says
Glad you’ve gotten wiser 🙂
Katherine says
In a recent conversation, a family member passed on some advice they’d heard long ago: If you can’t afford it at 100% today, what makes you think you’ll be able to afford it at 120% tomorrow?
Freedom Fiend says
That is actually an excellent way to put it!
Michelle Schroeder-Gardner says
I agree 🙂
Michelle Schroeder-Gardner says
YES!
DNN says
I’ve heard of dumb stuff people do such as financing Michael Jordan sneakers, financing Polo Ralph Lauren Clothing, financing gas, financing food, and willing to pay more in credit card interest, Associated costs and even late fees after paying for tangible items like those. One thing I learned is after paying on a credit bill, I’ll think twice about financing certain things before paying for it with credit because in the long run, I end up paying more.
Michelle Schroeder-Gardner says
Yep!
Cathy Mueller says
How about phones? So many people upgrade to newest phones without thinking about the debt incurred. My son saw the commercial for Sprint where one can upgrade for life. I had the salesperson confirm that indeed you never get out of debt.
Michelle Schroeder-Gardner says
Ugh! That’s a good one to add here.
Ricky R says
I would normally agree with you, except these companies REQUIRE you to finance the phone with them. Another good marketing scam by these guys!!
Michelle Schroeder-Gardner says
Not all do. For many, you can pay upfront or buy an unlocked phone.
Michelle Schroeder-Gardner says
A lot of people finance RVs. It’s especially crazy when they take out a 20 year loan on one!
Michelle Schroeder-Gardner says
Haha yep.
Kevin says
I heard once that some of the highest margins in the retail world happen in jewelry and clothing. Now people finance these things. It makes me cringe I see people I know with a ton of new clothes after a shopping spree knowing they just used their plastic.
Michelle Schroeder-Gardner says
Crazy!
Lenny Cohen says
The fact you mention pets but not adopting them is a shame. Pets shops are out to make a buck, like any other business. Adoption centers are there for the right reasons, do good work and charge a whole lot less. Plus, they save animals’ lives and you never know what you’ll find there. Serious omission. 🙁
Michelle Schroeder-Gardner says
I talk about adopting when you click over to the full post 🙂
Both of my dogs are rescues so no need to be so sad.
Xrayvsn says
You just hit the nail on the head of why consumer debt is such a problem.
We live in a “I want it now” instant gratification society. Rather than save the money for the purchase, we as a society encourage financing it, making the overall cost end up being far more than the purchase price.
I have only taken advantage of financing when there is a 0% rate on a large purchase (which I could afford to pay outright but figure it’s free loan). But you have to be careful to have the full payment made prior to the end of promotion date otherwise they can hit you with all that accrued interest during that free period (I usually pay a couple of months ahead of this just to make sure).
Michelle Schroeder-Gardner says
Yes!
Kris says
Outside of purchasing a home or something that has an enormous price tag that is six figures, I did it’s not a smart idea to finance anything like a car or furniture. I also saw that wireless companies are financing phones now. Not surprising this happens with how expensive they are now but if you are going to buy something like that, I would rather pay if off rather than seeing a monthly bill for a phone. And plus the interest charges too. No thanks!!
Michelle Schroeder-Gardner says
I agree!
Cody B says
I think this could be extended to every “soft” expense. Eating out, electronics, accessories, subscriptions. It’s one thing if people are trying to get their financial situation sorted and are putting groceries on a credit card and having that balance collect interest, but another thing entirely to have something that’s purchased because of instant gratification urges.
Michelle Schroeder-Gardner says
I agree.
Nadia Malik says
Most of the people are doing it to keep up with the people they hang out with. I believe nothing will bring you comfort or happiness if you are doing it to show off and trying to get approval of others. plus they put themselves in so much financial distress. It’s not worth it by any means.
Michelle Schroeder-Gardner says
Definitely!
Michelle Schroeder-Gardner says
8 years is crazy!
Sarai says
Guide dogs do not need to be financed. The handler is never required to pay full price for a guide dog. The Seing Eye charges $150 for your first dog, $50 for your subsequent dogs, and Vets pay $1. These payments include flight, room board, equipment, food. The school relies on donations.
Michelle Schroeder-Gardner says
Good to know. I had some readers tell me otherwise so I was not sure.
Nicola says
This leaves me speechless too! The only things I will ever take out a loan on are my house and my car. Other than this, if I can’t afford to pay for it in cash then either I don’t need it or I could get by with a budget alternative.
Michelle Schroeder-Gardner says
Yes!
Chonce says
I will never understand how someone can finance a pet. If you can’t afford it, don’t buy it. And do people not realize that pets cost way more as time goes on? Pet insurance, food, vet bills, etc. Why buy an animal at all if you have to finance them? Plus, adoption is so much better in my opinion!
Michelle Schroeder-Gardner says
I agree! It is shocking.
SC | MissFunctional Money says
UGH the pet thing still makes me so sad. That’s just ludicrous, and the people who offer it should really challenge their own core ethics.
Sadly, I have a good friend who had a massive, over-the-top wedding and is still paying for it (and will be, for awhile). I just can’t imagine entering a marriage with such a hefty debt for something that was so unnecessary. Friend, if you’re reading this, the cotton candy bar, torched cocktails and mini ice cream station were all unnecessary. They just were.
Michelle Schroeder-Gardner says
Same here!
Bridgette says
I recently had my phone stolen. On June 23rd to be exact. I had just upgraded my phone a couple of months before and we had JUST started our savings plan and get rid of debt plan that month. The amount of people that swore they couldn’t live without a phone shocked me. They told me to charge a new one, don’t save as much this month or blah blah blah. No!! Hubs still had his and O had access to email on my computer. So, we saved for a new one. I went from June 23rd to August 15th without a personal cell. I refused to save for it unless the three different accounts saving in (one for RV, one for emergency savings and one for trip savings) was already paid. It felt so good to detach from internet and to know we budgeted for it.
Elle says
When we bought our house we asked to keep the washer and dryer – we were told the seller could not give the washer because it was still being paid off… and they were moving to a house triple the cost of the house they were selling. Can you imagine???
Michelle Schroeder-Gardner says
That is a disaster!
Jony says
Hi,
This financing-everything craze is definitely something that is very North American. There is an obsession here of wanting things NOW. Nobody wants to wait until they saved up enough money to actually buy it outright. I am very old-school that way – I did not even want to buy a house via a mortgage until I was 40.
Ana Melendez says
I saved more than $1000 for my vacation to Puerto Rico. My hubby and I made a daily budget on how much to spend daily during our trip. We managed to stay under budget and no credit card from our vacation. We also saved for our wedding. We paid cash for our wedding under 5k and we couldnt be happier.
SmarterSquirrel says
Financing a car to me is ridiculous. If you can’t buy it with cash you can’t afford it. My first car cost me $1,200. My latest car cost me $18,800. Both bought with cash. I could only afford $1,200 cash for my first car so that’s all I bought.
Monty says
Great article! Sadly, I admit to doing some of this when young and stupid. Now I treat a credit card like a spare tire…only in an emergency!
Rajesh Sharma says
Very helpful article. I have done some of this like I have spent a lot on gifts, pets and especially on clothing. But, now I spent according to need and I also use a credit card just in case of an emergency. Otherwise, I have saved a lot of money. So, thank you for this great blog. I really liked it.
Yvonne Mackey says
This information is helpful. Like many, when I was younger I didn’t take care of my credit and finances well. Now that I’m older, I’m much more frugal with my money and building towards financial security.
I personally think it’s ridiculous to finance seasonal amusement park passes and expensive cell phones.
DNN says
One thing some young men do to impress women is allegedly financed a brand-new car like a Mercedes, Jaguar, or luxury vehicle like a Lexus when they’re only making minimum wage and living in a one-bedroom apartment. They should focus on increasing their side hustle income, by using the income they generate from their traditional employment and multiply it online through affiliate marketing and side hustles. 🙂