When making large purchases or investments, there are many questions you need to ask yourself to make sure it’s the right purchase for you.
While on the surface, the decision to buy may seem obvious and beneficial, there are instances in which that’s not the case. Many people make purchases without thinking about all that follows. Typically, when it comes to larger purchases, there is a lot tied to it that could end up costing you more in the long run.
The Advertised Cost
Whether you’re shopping for a home, thinking of buying a new car, or you need a new washer and dryer the advertised price is often what draws you in. You see this face amount and think, “I can afford that.” While you may be able to afford what is advertised, when it comes to larger purchases that you don’t have all the funds to pay for at once, there’s a lot more to it than the advertised price.
How Much Interest Will I be Charged?
If you’re making a big purchase, chances are you’re going to need to take out a loan or take advantage of store financing options. While it might seem great to be able to put $0 down and pay 0% interest for the next six months, what happens once that time has elapsed? There are tools such as online calculators that allow you to see the actual cost of an item including interest. Interest, depending on the item can be a few extra bucks or a few thousand dollars extra.
Are There Penalties, Fees and Other Associated Costs?
What fees are assessed on this item you’re thinking of purchasing? How frequent will these fees and associated costs be added to your overall balance? There can be fees and penalties for late payments, processing fees, pay by check fees and more that you’re not aware of that could rack up the total cost of your purchase.
How Long Will It Take to Pay it Off?
The longer it takes you to pay off a big-ticket item the more it will cost you. Think about it. The longer your account has a balance the more interest, fees, and other associated costs you will incur. However, if you can pay for the item upfront or within a reasonable amount of time you can save a ton of money. For instance, someone who can pay off their mortgage in 15 years rather than 20 will save thousands in interest.
What Other Costs are Involved?
When you pay for a house, a car, or an appliance, you’re not just paying for the item and the loan you used to get it. You will also be responsible for paying for the maintenance and upkeep of that purchase. A home, for instance, will need a roof repair or some plumbing work done. A car will eventually need a tune-up and other engine work done. An appliance may need to be serviced from time to time.
What Happens When You Don’t Get Informed
When you don’t make an informed decision on big-ticket purchases, you can set yourself up for serious trouble. You can take on more of a financial responsibility than you can handle, you could end up falling behind on payments and ruin your credit, and even worse you could end up losing the very thing you were trying to purchase such as a foreclosed home or a repossessed car.
It may seem like a lot of work to get all the facts and know all the associated costs of making a big purchase, but in the end, it is the only way to safeguard your finances. Rather than make impulsive decisions, take the time to get all of the facts and know what you’re really getting yourself into. Then, if you believe it is something that you can take on, make the purchase knowing that you did so wisely.
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