When you’re in the hole borrowing money from the bank is the worst thing you can do. Lets break that down for a minute so we can understand just why it’s such a bad idea.
When you owe money in most cases either you bought something you can’t comfortably afford or you have stacked up debt because you are earning enough to cover you expenses. I’m not here to judge I’m only here to help. So let’s set aside for moment the reason you’re in this debt. And focus on how to fix the problem.
Why is borrowing money from the bank the worst thing you can do
The money you return on that loan carries with it tremendous interest. Even worse most of the loans you take from banks are structured in a way the Charges the interest upfront. So if you take a loan for $10,000 and you have to return $12,000 over a period of let’s say three years. Those $2000 are going to be charged upfront.
The way the bank does this is they charge the $2000 in the first few installments. So if you were to go to the bank and say that you want to return the loan ahead of time so that you can save interest. You will still be paying the full $12,000. In addition to that they will charge you late fees for every day you are late with an installment.
You would think this would be common knowledge. But most people don’t know that the banks do this. Most people think that the bank employee is their friend. They have a few laughs, they ask for a loan and more times than not they get it.
The bank is not your friend, the bank is simply a store that buys money cheap and sells it expensive. When you look at it this way you start viewing the bank employee as you would do a used car salesman.
That’s exactly the attitude I would advise you to have when working with the bank. You work hard for the money you earn and you shouldn’t have to blow it off because somebody takes advantage of you.
Start saving money even if you feel you can’t afford it. Start saving 10% if everything you earn for just such a situation. In cases that a client pays late and you still have to pay your taxes. In case an unexpected expense comes up. And hey if everything works out, you can take the money and go on vacation once in a while.