Banks - The Legal Loansharks

The Symbol of Legal Loansharks

I want to address the issue of Credit Cards and Bank Loans. I've heard many stories that are linked to credit card debts and bank loans. Everything is fine and dandy when you take a loan from the bank and pay up on time, but the consequences of not doing so can send you into an abyss of debts. The same goes for credit cards. I was doing some homework concerning bank loans because I want to know how much I've to fork out, ultimately, if I want to buy a car or HDB house. The results shocked me.

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After much research, I came to this conclusion:

1. With regards to Buying a Car. I will choose the car with one resolute criteria - whatever car I choose, it would be ideal for me to pay in full without taking a loan from the bank, but if that ideal scenario is beyond my financial ability then I must be able to pay at least 70% of the total cost of the car, taking a loan of only 30% of the car's value. What I don't understand is this, many people take up a loan from the bank when their financial situation allows them to pay for the car in full, this would be wise only if they use that amount of money in an investment which would cover or exceed the interest rates that the bank imposes on them for that loan. However, I observed that many people take up a huge loan and pay small amounts over many years just so they won't feel the initial pinch of having to fork out a huge amount of money for a car. That is the pinnacle of foolery.
2. With regards to Housing Loans. If I want to buy a HDB flat, I will start small, say a three room or four room flat, not a big-ass five room, executive flat or worse still, a condominium, which costs heaps of money. I understand that not many people have the ability to buy the house in full, come on, if anyone can do that, they probably would not be living in a flat in the first place. So the rule of this game? START SMALL, buy a flat which you can comfortably afford, get the smallest loan from the bank that you possibly can and aim to pay off your loans in as little time as you possibly could. I also observed that many people claim that they want to purchase property for investment as well as to put a roof over their heads. " Hello, wake up your idea lah! " If it was that easy, the property market would be perpetually saturated and you would not get fantastic returns anyway. So rule of thumb - Start Small. Remember, you do not know what the future holds, in the event of retrenchment or some other bad stuff happenning, big stacks of money trumps over big house. ( unless you have an appetite for bricks )
3. With regards to Credit Cards. For crying out loud lah, DO NOT SPEND MORE THAN YOU EARN. This also FD must teach, wah piang eh*. Once again it is all fine and dandy if you pay up ON TIME, EVERY TIME! The trouble comes when you don't! Credit card interest rates can snowball into a sizeable amount. Bankruptcy lurks at the corridoors of financial ignorance. The best is to apply for a Debit Card instead of a Credit Card. Why? Look here for Mr Wang's explanation.

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Yes, I've a credit card, it is a supplementary card FD senior gave me, but let me tell you this, the 4 years which I held this card, I only used it 3 times, only when it was absolutely necessary. Anyway, I wishes you all the best. Think -> Plan -> Execute. Remember Banks are simply Legal Loansharks, don't let their smiles or friendly service fool you into a false sense of security.

*Wah Piang Eh: Hokkien Term. Probably the most common Singlish expression of all, it is used in much the same way as "oh my goodness", "wow", or "damn!", depending on the tone used, and the context.