Is there any clever way of borrowing $4-5k without paying a ridiculous amount of interest?

IPYF on 25/01/2017 - 09:50

Sorry if this is asked a bunch, or if this is in the wrong spot, but I have a situation that's 100% hypothetical at this point and I'm wondering how you clever-clogs who do this kind of thing regularly would deal with it, if you were to go ahead.

I want to buy a 'big ticket' luxury item that costs exactly $3800. This is too much money for me to pay as a lump sum, but I would have absolutely zero dramas paying off that kind of amount over a year. Apart from paying ticket price, the only other financing available on the item from the retailer is a 'rent-to-own' deal, where the best price + interest (assuming I don't miss any payments and buy out the balance at the 12 month mark) comes to about $5200 which is just under 38% interest which seems to me to be a massive rip.

I know this sounds super naive but I'm an extremely frugal and risk-averse adult and I have never had a physical debt of more than the price of a meal for more than a few hours. I have never had a credit card, because spending money I don't have yet by promising to pay it back in the future terrifies me (because what happens if I get sacked and I can't pay off the card?). It's just something that I've never done and I don't trust the bank not to see me coming, pull a fast one, and sign me up for something ghastly and in their best interest (if you'll pardon the pun) if I go and ask them for advice.

Can anyone think of a clever/creative way for me to get that kind of money as a loan or as credit where I could pay it back over a year and come out of it better off than losing $1400 in interest? As an added benefit I think it'd also be a good move to go into my 30s with a credit rating of some form, which I assume I wouldn't have, having never borrowed a cent from anyone.

Financial

Comments

  • SnoozeAndLose on 25/01/2017 - 09:53
    -2

    I suggest you borrow from your friend and family and ask for discount.

    • IPYF on 25/01/2017 - 09:59
      +3

      Thanks, but not an option. As a young person I struggled a lot with finding work and my family helped me more than they could really afford to (like many families do when kids in their teens-early 20s try to find their way). I will not touch my elderly parents up for money, and I don't have a friend I would put in this position.

  • loke on 25/01/2017 - 09:56

    family, or take out a small personal loan

  • thatonethere on 25/01/2017 - 09:58
    -2

    Find a retailer that does an interest free loan?

    • IPYF on 25/01/2017 - 09:59

      It's a specialty item available from one place only. The retailer that has it is the only retailer in the country that has this item, and there is only one in the whole country.

  • 17833 on 25/01/2017 - 09:59
    +12

    Apply for a credit card that has 0% purchase for a period of time. Pay using the credit card, then every month pay the minimum amount, hopefully you can pay the full amount before the interest free period ends.

    • Jebediah_Kerman on 25/01/2017 - 10:17
      +4

      Or alternatively, if you already have a credit card. Put it on your existing card and do a balance transfer to a new card offering 0% on balance transfers for 12 to 24months

      • 17833 on 25/01/2017 - 10:19

        Great idea, heaps more cards offer balance transfer offers.

  • Gronk on 25/01/2017 - 10:09
    +1

    38% interest is an absolute sucker rate, a normal interest rate for a personal loan would be somewhere in the region of 10% - 14%.

    I think your best option is to either go with a credit card that offers 0% interest on purchases for some period, or take out a personal loan with a bank, but you'll inevitably end up paying some interest because it needs to be worthwhile for the lender to take the risk in lending you moneh in the first place.

  • nickomac on 25/01/2017 - 10:11

    Get a Citibank balance transfer credit card and utilise the cheque to self feature - they'll send you a cheque in the mail for the balance transfer amount. I did this with the Citi Simplicity card a couple of years ago and was really straightforward

  • entercoolusername on 25/01/2017 - 10:14
    +21

    This " I'm an extremely frugal and risk-averse adult" should answer your question, save up that money then buy it.

    • Diji1 on 25/01/2017 - 10:20
      -1

      This ^.

    • [Deactivated] on 25/01/2017 - 10:29
      +1

      Unless this item will make you money (e.g. an investment) then any luxury item you are figuring out how to pay back is probably not worth it.

      Save up the money and buy it later would be the best bet, assuming it is a commodity.

      Australian credit ratings are different to American ones. Having a credit card and paying it off in full doesn't increase your rating, although you could use the documentation as support later on.

  • hell0 on 25/01/2017 - 10:16
    +1

    Create a GoFundMe page and put it on here and facebook together with your story.

    Something like… 'if every member of OzBargain paid 50c your dream will become a reality'

  • geek001 on 25/01/2017 - 10:26
    +3

    If you are frugal and risk averse, you will not spend money you do not have. Save the money then buy it as others have pointed out. Bonus tip: Never borrow money to buy a depreciating asset. :)

  • railspider on 25/01/2017 - 10:49

    Nearly every bank offer personal loans for this sort of thing - it'll be at a much cheaper rate than 38%

    If you're on government benefits you can also ask Centrelink for a no-interest loan or payment advance, I believe.

    • retiredfeline on 25/01/2017 - 17:02

      Mmm, with Centrelink engulfed in the robodebt scandal I'm not sure it's a good idea to go anywhere near them.

  • mskeggs on 25/01/2017 - 11:06
    +3

    As entercoolusername says, your comments suggest you are risk averse and conservative - both good things to be! If saving is an option, or saving a portion first so your first credit payment is significant, then please consider it.

    There isn't a finance product that completely meets your needs of low interest and ability to deal with unexpected issues like job loss. Even cards with job loss insurance will only pay the minimum balance while unemployed, and the costs of that protection are too high in my opinion.
    There are alternatives that might be get an acceptable result.

    The easiest would be to just open a low rate credit card, then pay it off as quickly as you can. Assuming you paid off $380 a month and got a 10% card, the interest bill would be $150.
    The advantage in terms of risk here is that if you lost your job etc. you could pay just the minimum payment for the months you were unemployed, usually about 2% of the balance. This automatically gives you some breathing space in case of an unforeseen issue.
    You can play around with the interest calculator here to see what different repayment schedules cost:
    https://www.moneysmart.gov.au/tools-and-resources/calculator…

    Canstar has a list of low rate cards here:
    https://www.moneysmart.gov.au/tools-and-resources/calculator…

    I note there are some that have trial rates or balance transfers. If you can find one that offers cheap interest for your first $5k of spend (for example) you might end up paying no interest at all. I recommend zero fee cards, of course.

    Note that the other alternative of doing balance transfers to take advantage of zero interest offers holds the risk that if you lost your job in 6 months time, you would not be able to open a new card to do the transfer - so if you follow this approach, make sure you get the balance on a long term zero card offer early so you aren't caught out.

  • nomoneynoproblems on 25/01/2017 - 11:13
    +4

    If you can't afford it, don't but it. Its only 4 grand. :/

  • supnigs super skids on 25/01/2017 - 12:34
    +2

    try mumbank

  • sky blu on 25/01/2017 - 12:40

    Well you still got the blueprint for the bank job we were talking about last time?

  • humdingaling on 25/01/2017 - 12:45

    poking holes in your hypothetical question would be easier than getting what you are asking

    having "zero dramas" of repaying and "what happens if I get sacked and I can't pay off the card" are quite contradictory

  • shaybisc on 25/01/2017 - 17:27

    How about P2P?

    https://www.societyone.com.au/

    Do you have a credit score?

  • demiurge on 25/01/2017 - 18:20
    +1

    Don't buy it until you have 3800 saved up. Don't spend what you don't have unless it's a mortgage.

    • affable on 26/01/2017 - 07:29

      Exactly, save up the $3800 over 2017 which is how long you said it would take to pay it back. If you still want the item, buy it however I bet you don't want the item in 2018, and you'll have $3800 in your pocket to spend on something you really want.

  • sj2can on 26/01/2017 - 12:47

    CBA Low Rate credit card @ $250 cashback.
    Buy item with their Great Rate 0.99% for 3mo
    Pay interest for remaining 9 months though but you'll be able to make a good dent in the principal in the first 3mo.

  • Seraphin7 on 26/01/2017 - 14:25

    I suppose simply saving the money for the purchase would be out of the question? If so, why?

  • rompastompa on 26/01/2017 - 14:31

    Equity mate!

  • plowry1977 on 26/01/2017 - 19:00

    Look into coles credit card, they gave me $6k which paid for my solar. Balance transfer to it and its interest free for 18 months. Just pay the minimum payment each month. But be wary you cannot use card at all or you start paying interest

  • [Deactivated] on 26/01/2017 - 19:04
    +3

    You're not an adult if you require credit to get a $3800 item.

  • Steptoe on 26/01/2017 - 22:50

    Collect Aluminium Cans

  • phocus on 31/01/2017 - 16:16

    if its a luxury item and you havnt spent the time planning and saving for said item. You dont deserve it.

  • Peck on 31/01/2017 - 19:26

    I don't believe in borrowing and paying interest on anything other than an owner occupied house, however I did borrow to bring forward some Super Contributions (calculated to put me ahead of course). I borrowed from this mob and no problems. You do have to join, which may have been $10, but I think that is refundable when you leave.
    Discounted personal loan 8.35% Unsecured Personal Loan 15.78% comparison rate %.
    https://www.peopleschoicecu.com.au/products-services/persona…

  • NotAMoodle on 04/02/2017 - 12:53

    Whilst I agree with most on here regarding it's probably best to save for it, here is the best offer I could find you.

    0% interest on purchases for 6 months with no annual fee. If you pay it off within 6 months and close the card it's a win! If you don't pay it off in 6 months, well, you know the rest.

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