Podcast
Questions and Answers
What is the suggested first step for utilizing extra money according to the text?
What is the suggested first step for utilizing extra money according to the text?
- Reward yourself with something special
- Save for retirement
- Invest in a washer and dryer or a freezer (correct)
- Save for future planned purchases
What is the recommended financial goal in case of lay-off, illness, or emergencies?
What is the recommended financial goal in case of lay-off, illness, or emergencies?
- Rewarding oneself with something special
- Investing in higher-interest APRs credit cards
- Saving six to twelve months of monthly expenses (correct)
- Purchasing insurance policies
What is the key advice given regarding budgeting in the text?
What is the key advice given regarding budgeting in the text?
- Distinguish between 'needs and wants' (correct)
- Prioritize 'wants' over 'needs'
- Disregard the difference between 'needs and wants'
- Focus solely on fulfilling 'wants'
What is the caution given regarding the use of extra funds for rewarding oneself?
What is the caution given regarding the use of extra funds for rewarding oneself?
What are the potential consequences of not planning and budgeting for necessary monthly expense payments?
What are the potential consequences of not planning and budgeting for necessary monthly expense payments?
Why do many people end up with very low credit scores according to the text?
Why do many people end up with very low credit scores according to the text?
What is the major reason for the high financial consequences of not planning and budgeting for promotional purchases?
What is the major reason for the high financial consequences of not planning and budgeting for promotional purchases?
What is recommended for better financial management?
What is recommended for better financial management?
What should be prioritized over wants in budgeting?
What should be prioritized over wants in budgeting?
What is essential to avoid financial strain when planning for larger ticket purchases?
What is essential to avoid financial strain when planning for larger ticket purchases?
What should be done with discretionary income after meeting overhead expenses?
What should be done with discretionary income after meeting overhead expenses?
How should credit cards be used for major purchases?
How should credit cards be used for major purchases?
What can be used for planned future expenses such as home repairs and vacations?
What can be used for planned future expenses such as home repairs and vacations?
What is crucial to avoid financial strain when budgeting for major purchases?
What is crucial to avoid financial strain when budgeting for major purchases?
What factors should be considered when buying a vehicle?
What factors should be considered when buying a vehicle?
What does the text emphasize in making wise financial decisions?
What does the text emphasize in making wise financial decisions?
What should be done before making unnecessary 'want' purchases like replacing furniture?
What should be done before making unnecessary 'want' purchases like replacing furniture?
What is a crucial step for making informed decisions about major purchases?
What is a crucial step for making informed decisions about major purchases?
What is a potential downside of 0% APR financing for major purchases?
What is a potential downside of 0% APR financing for major purchases?
What can happen if one defaults on a deferred interest program for a major purchase?
What can happen if one defaults on a deferred interest program for a major purchase?
What is a risk associated with longer financing terms for major purchases?
What is a risk associated with longer financing terms for major purchases?
What can happen if one defaults on a 0% APR interest loan for a major purchase?
What can happen if one defaults on a 0% APR interest loan for a major purchase?
What is a common strategy used by retailers to promote major purchases?
What is a common strategy used by retailers to promote major purchases?
What is the impact of defaulting on promotional programs for major purchases?
What is the impact of defaulting on promotional programs for major purchases?
What type of lenders often finance enticing promotional offers for major purchases?
What type of lenders often finance enticing promotional offers for major purchases?
What is a potential advantage of 0% APR interest programs for major purchases?
What is a potential advantage of 0% APR interest programs for major purchases?
What is the purpose of thorough research and budgeting for major purchases?
What is the purpose of thorough research and budgeting for major purchases?
What is a potential consequence of relying on emotional and impulsive purchases for major items?
What is a potential consequence of relying on emotional and impulsive purchases for major items?
What is a potential outcome of financing major purchases with sub-prime lenders?
What is a potential outcome of financing major purchases with sub-prime lenders?
What happens if a $4,000 0% financing loan is defaulted after 12 months of paying on time?
What happens if a $4,000 0% financing loan is defaulted after 12 months of paying on time?
What are the consequences of defaulting on a Deferred Interest Period Program?
What are the consequences of defaulting on a Deferred Interest Period Program?
How much interest payments can defaulting on a $2,000 Deferred Interest loan after 12 months result in?
How much interest payments can defaulting on a $2,000 Deferred Interest loan after 12 months result in?
What is the potential impact of making a cash advance to pay off high-interest promotional loans before defaulting?
What is the potential impact of making a cash advance to pay off high-interest promotional loans before defaulting?
What happens if a 72-month Deferred Interest loan is defaulted?
What happens if a 72-month Deferred Interest loan is defaulted?
What is the consequence of defaulting in the 12th month of a 24-month promotion period for 0% APR interest?
What is the consequence of defaulting in the 12th month of a 24-month promotion period for 0% APR interest?
What is the impact of defaulting in the 12th month of a Deferred Interest Promo?
What is the impact of defaulting in the 12th month of a Deferred Interest Promo?
What is the potential benefit of taking a cash advance on unused credit card balances to make payments on high-interest promotional loans?
What is the potential benefit of taking a cash advance on unused credit card balances to make payments on high-interest promotional loans?
What is the potential impact of defaulting on promotional programs?
What is the potential impact of defaulting on promotional programs?
Study Notes
The Dangers of Defaulting on Promotional Loan Agreements
- Defaulting on a loan agreement with 0% APR financing for furniture can lead to a 30% APR interest rate on the unpaid balance from the date of the missed or late payment, significantly increasing the amount owed.
- For a 0% financing loan of $4,000, defaulting after 12 months of paying on time leads to a loan balance of $7,137, and for an $8,000 loan, the balance becomes $14,275, both incurring a 30% APR interest rate.
- Deferred Interest Period Programs offer no interest during the first 6-24 months, but if the entire balance is not paid off by the end of the term, interest is charged from the original date of purchase.
- Defaulting on payments for Deferred Interest Period Programs results in the revocation of program perks and a requirement to pay a 30% APR interest rate from the original date of purchase.
- Taking a cash advance on unused credit card balances to make payments on high-interest promotional loans can help avoid defaulting and keep payments lower than a 30% APR interest rate.
- Defaulting on a $2,000 Deferred Interest loan after 12 months can result in over $3,057 in interest payments, and for a $4,000 loan, it can lead to $6,113 in interest payments, both at a 34.6% APR interest rate.
- Defaulting on a 72-month Deferred Interest loan can cost over $11,071 in interest, 2.77 times the amount financed, or 277% interest when calculated from the start of the loan.
- Defaulting on promotional programs can ruin credit ratings and cause financial hardships.
- Defaulting in the 12th month of a 24-month promotion period for 0% APR interest results in a 30% APR interest rate applied to the last twelve months of the unpaid balance.
- Defaulting in the 12th month of a Deferred Interest Promo requires paying the higher interest rate from the first month until the loan is paid in full, making the cost of the loan much higher.
- Making a cash advance to pay off high-interest promotional loans before defaulting and paying off the balances at a lower interest rate on credit cards can lower the potential interest rate by 20% or more, and eliminate a defaulted loan on a credit report.
- Long-term promotional loans, such as 48-72 month terms, increase the risk of defaulting over a longer period of time, making it crucial to plan and budget for these purchases.
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Description
Learn about the risks and consequences of defaulting on promotional loan agreements for furniture and other purchases. Understand how defaulting can lead to high APR interest rates, increased loan balances, and financial hardships. Discover strategies to avoid defaulting and manage promotional loan payments effectively.
