What are “Dangerous Debts”?
There are some high-risk debts which are best to avoid as they can easily become dangerous debts.
Many with subpar credit who wish to make purchases find themselves in precarious situations related to credit arrangements.
One common issue is purchasing furniture through a rent to own arrangement.
There are many stores which don’t perform credit checks or even ask for a down payment.
Though most need income proof, even those with awful credit can purchase furniture.
When you agree to lease furniture, they detail the payment arrangements and terms.
While often less than desirable, it does not deter the majority of purchasers.
It is easy to see how saving for furniture would be preferable to a rent to own arrangement by completing a quick cost comparison analysis:
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Comparing The Approaches
To purchase a couch with weekly payment arrangements on a rent to own arrangement, the four times a month payments could average to roughly $16 per week.
Generally, the term is in the range of 36 months.
This amounts to a total of $2,304 in addition to the tax owing on that amount.
Considering the fact that an average couch costs approximately $1,500 plus tax, the arrangement results in a loss of $804.
When you consider the fact that many charge interest on the amount, the amount that you ultimately owe essentially skyrockets.
This is especially important to understand in situations which require no down payment.
If you look at the value of the furniture itself, compared against the amount added by compound interest and tax over time, there is little value to getting a rent to own arrangement.
Consider the fact that this secured debt means that if you default, the item is repossessed, the risk is too high for someone with poor credit.
A Better Way
There is a preferable way to get the items you seek without taking out this kind of secured debt.
Consider saving for the furniture instead.
Store your funds in a high interest savings account, and let it accrue interest.
Instead of making that $16 weekly payment, deposit it into the account.
Keep your eyes out for sales on furniture and opt to make the purchase when it is at the best possible price point.
By exercising financial prudence, you can easily avoid dangerous debt and keep your monetary situation in the black.
Information on Consumer Proposals
Consumer Proposals in Canada – An Alternative to Bankruptcy
What is a Consumer Proposal?
How to Amend a Consumer Proposal
What are the Benefits of a Consumer Proposal?
What are the Steps in a Proposal?
Consumer Proposal Eligibility
What Debts Are Erased in a Consumer Proposal?
Is There Life After a Proposal?
How to File for Bankruptcy
What is Bankruptcy?
How Does Bankruptcy Work?
What is the Cost of Bankruptcy in Canada?
How to Rebuild Credit Following Bankruptcy
Personal Bankruptcy in Canada
What Debts are Erased in Bankruptcy?