Thursday, 26 February 2015

More Younger Customers Finding Instant Cash the New Way



Earlier this week, a friend of mine wrote about younger customers heading to pawnshops for quick cash, and just yesterday, I read about a 31-year-old's failed plan to rob a bank in order to pay off his loans.

My personal mantra is to (i) stay out of debt (ii) clear off debts as fast as I can (iii) have enough cash savings so that I never have to resort to taking a loan. But recently, I've been looking at some loans for my sister to take, as we hope to pay off her tuition fee loan as quickly as possible in order to pay minimal interest to OCBC at almost 5%!

I must admit, some of the promotions for the loans are attractive. Take a loan and get a freebie! (Don't forget that your so-called "freebie" is probably paid for in your interest rate). Here's some cash on loan, because life should be worry-free! (Life is NEVER worry-free. We can only hope to minimize our worries.) Don't need to put your desires on hold! Loan up to 4 times your monthly income!



Now this is where it gets scary. Loaning someone more than their monthly income is definitely overspending, because as far as possible, we should always aim to keep our monthly expenses below our monthly earnings. If I earn $2000 and borrow up to $8000, it will take me 4 months of zero spending to pay back the loan (which is unlikely). Factor in interest rates...how long will you take to pay it off, really?

I personally have a Citibank Ready Credit account, but I never use it. (Why? Read my personal mantra again.)

While I understand not many may see the importance of saving up like I do, I cannot grasp the fact that there are people who have to resort to such drastic measures just to clear their debts. In fact, one of the most common traps for us to fall into is credit debt - especially with the wide array of credit cards available these days for us to choose from.

Now, don't get me wrong. I'm a huge advocate of credits cards for their discounts and rebates (read my post here on how using credit cards helped me to save quite a bit), but note in my recent guide for fresh working adults, I don't recommend getting a credit card just yet. The reason is simple - with access to credit, there's a very likely possibility that we may overspend without realizing it. Even I didn't trust myself to use my credit cards in the first few months after getting them, and until today, I monitor every single credit card bill closely to make sure I pay off everything by month's end.

But we can't exactly blame them, can we? Just look at this advertisement - a girl laments about not having money to buy her boyfriend a laptop, and Michelle Chia points her to "find instant cash the new way!" with Maxi Cash pawnshop.



There also seems to be more and more moneylenders appearing these days - the last time I walked through my neighbourhood, I counted at least 3 licensed money lenders (and 4 pawnshops). What happened?! Business must be soaring, if not, why would they be willing to pay the expensive store rental to open up more physical premises?

I think MDA really needs to moderate some of these advertisements, as they're sending the wrong message. There's a difference between getting cash for your needs vs. your desires, and even if those are real needs, if you don't have the cash, then perhaps it's time to cut down on some of these "needs".
  
We can blame the lousy advertisements, or we can blame ourselves.

3 comments:

  1. HI BB,

    In the past when salesperson called my number to ask if I need a loan, I always ask them if I can borrow 1 million. They will ask me how much my pay is, and I'll say it's 1.5k. If they can loan me at 2% for say 6 months as a promotional, plus a fixed admin fee, I don't mind borrowing from them. I'll just put into preference shares of banks, and leverage on the interest gained. But usually they will chicken out and say the amt is too big for my salary.

    I concur with your observations that there's a lot of pawnshops and money lenders. Just a walk in my neighborhood, I can see a cluster full of such vulgar blinking $ signs flashing right in front of my face.

    Utterly disgusted.

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  2. Refusing to succumb to loans is your personal preference. Not everyone has similar situations like you. Some may have lost their jobs and in between jobs while getting a loan to make ends meet for their family. Others are simply holding a job as a salesperson to feed their daily life. Having to resort to taking them for a ride in your 1 million little "rrevenge" won't help in ur endeavours to advocate ur strong beliefs of keep these loan shops down tone. To each his own, I think you should keep ur mindset in check - it's getting a tad too extreme.

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  3. Hi eyeswideshut,

    Talking about me? I'm always civil to salesperson who called me. My wife used to be in the sales line before so I understand. I'm not tekaning them. I will start off with a 'no thank you', but if they insist on explaining to me, then I counter offer by asking for the terms that I want, which is a million at 2%pa. I could have slammed down the phone and scolded them like many others out there. Or is it better because I won't be wasting their time?

    If pple need a loan to tide over their situation and these shops charge such a high interest rate, how is that helping? Isn't it like robbing someone whose house is on fire? How can u in good conscience say it's okay? 50% interest in loan amt? Borrow 1k and pay 500 per month for 3 months?

    Hearing this kind of day light robbery, of cos I'm extreme!

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