8. Tips on How to Take Out a Loan (Borrow Money)
Interviewer: “Now, what about a loan? If someone has to take a loan out for an emergency bill – Maybe an emergency vet expense, or something. How do you best take out a loan without falling into the trap of debt? You’re the expert here, Dave.”
Dave: “Well, we advise our clients to borrow the least amount of money they possibly can, over the shortest period possible. So if you need $840 bucks, don’t borrow a thousand. Borrow $840 and pay it off as fast as you can. If you can afford $50 a week, stick to the $50 and pay it off as quickly as possible, so you pay less interest and you’re out of debt sooner, so you’re able to move on with your life.
If it’s a case of buying cars, sure, the interest rate is cheaper on your house mortgage, but If you borrow from your mortgage, you’ll be paying it off over 30 years. It will end up costing you dearly. You are better having a higher interest rate over three years or four years. If you can’t make payment for the car for three or four years you shouldn’t be buying one; you should be saving and paying cash really. Again, if you can’t afford to pay off a car in three to four years, just buy a less expensive car.”
Interviewer: “You raise an excellent point here. A lot of people want to buy new cars. I’ve fallen into that trap in the past as well, but actually, you know what? A car that’s a couple of years old is actually good enough.”
Dave: “Hey, for the Japanese cars, 5 years or even 8 years. They do 300,000kms. They’re buying a Toyota or a Nissan with 150,000km’s, it’s still a good car and they’ll be reliable and cheap. Anything beyond that is ego!
And hey, I’ve got that issue too, and I’ve bought some cars that are just egotistical. You recognise that if you’re happy to spend the money, it’s ok. If you can’t afford it though, you just have to acknowledge that this behaviour is just a bit of an ego trip. I personally like that ego trip, but you need to recognise it yourself, don’t fool yourself.”
Interviewer: “I guess it’s also making sure that you don’t fall into the habit of buying a new phone every time there’s a new release. The society we live in is very much an ‘I want it now’ mentality, so when the new phone that comes out, bam! You have to have it straight away. What I maybe think is a good idea, especially if you’ve got a partner who needs a phone as well, is that you can perhaps ‘bunny hop?’ So one of you gets a new phone this year, but the other partner doesn’t, they’ll skip a year (bunny-hop).
Do you know what I mean, Dave?”
Dave: “Yes, I run multiple businesses and most years I get the new iPhone and then it gets passed onto my wife. The year after it gets passed down to one of our kids or staff and it’s seven years before it’s out of the system. So yes, bunny-hopping technology makes a lot of sense and you don’t need to upgrade every year. $40 bucks a month extra on your phone bill for that new phone adds up to 2 grand a year. That’s the $2000 that made you short of money and it’s going to make a difference.”
Interviewer: “Yeah, for sure.
Ok Dave, let’s wrap this up. This is really valuable stuff. I think the card habit is one that everybody can relate to. Also, everybody knows that watching TV sucks the life out of you, so those little habits are going to make a massive difference.
Words of wisdom, my friend. You’ve given us some absolute gold
Thank you very much, Dave!”