Spending

Credit Isn’t Free Money

Credit isn't free money

What is happening when you are taking on a loan? or any other credit product, including car loans or credit card debt? When one takes on credit, you are buying money. But you should remember that if you take $100 on credit, you must pay it back. More than that, you have to pay more than what you took. So you will pay back, say, $120 after a month. Sometimes you pay in installments, so you don’t notice that you paid that much, but I can assure you, you are paying more than what you got in the beginning. So yes, you are paying $120 back when you only got $100 in the beginning. You are taking money but you are paying back more money.

But why does that happen? You must be paying for something else, right? You are paying for time. You are getting a benefit early ($100), and paying it back later ($120). Well, it is better to have $100 in my pocket today than next month, but is it worth $20? or whatever you are being charged in interest?

If you believe that the increased price for getting it now instead of next month is worth, go for it. If you are just taking it as if it were free money, don’t. It can get more expensive than what you know, and eventually get out of your control.

Just remember, Credit isn’t free money.

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IMMI Financial Solutions

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