Do Not Borrow Money Longer Than the Item You Buy Will Last
Going into debt is, at best, a decision that should be made with caution. However, there are certain situations when it is necessary or useful. One recommendation if you have to go into debt is to avoid loans for a period that exceeds the life of the product you are buying.
The longer you are in debt, the more you will have to pay in interest, which can end up costing more than the thing itself. While the interest in something like a reliable car or home may be worth it, it probably is n’t worth buying something like a pair of shoes or the latest smart device this year. As the personal finance blog Once Cent at a Time suggests, if the duration of your debt is longer than the time you can use the item, this is probably not a good idea:
[D] Don’t borrow money for something too extravagant, especially if it takes you too long to pay off. The debt and stress associated with this particular purchase won’t pay off. If you need to borrow, match the maturity with the expiration date of the purchase.
Of course, the opposite is not always true: just because you will use an item longer than you have debt does not mean it is worth buying. For example, you can still overspend on a TV or car, recoup it in six years, and still use it later. You should still weigh your purchases against what you can already afford. However, this is one very useful red flag.
How To Reduce Your Debt Due To Financial Debt | One cent at a time