Borrow with Caution

Read More

Borrow with CautionBorrow with Caution

When interest rates are low and property prices are rising rapidly, it is tempting to borrow more. There is a huge psychological effect on property owners when house values rise. They feel wealthier, and more confident. This can lead them to spend more or take on risky ventures and this often means borrowing money. It is hard to get through life without borrowing, but there are some basic principles to follow.

Only borrow what you need and only for essentials

The cost of a purchase is always greater with borrowed funds, so keep borrowing to a minimum. You may need to borrow to buy a car but it doesn’t have to be a late model car. Travel, clothes, new smart phones are all nice to have but borrowing to enjoy life now just makes your life less enjoyable later on.

Pay it off on time and as quickly as possible

While mortgage interest rates have dropped significantly, standard credit card interest rates are still around the 20% mark and store cards are around 25%. Only borrow on cards what you can pay off within the interest free period.

Find the cheapest source of borrowed funds

If you have to borrow for essential spending, shop around for the best deal on interest rate and other borrowing costs. It’s better to borrow at mortgage interest rates of 4-5% than to pay credit card and store card interest rates.

Borrow to invest

Investors who are disillusioned with bank term deposit rates are turning to property investment, using their available funds or home equity as a deposit and borrowing the rest. With percentage property value increases higher than interest rates, this makes sense. Caution is needed as interest rates may increase in the medium term and property values may eventually stagnate or even fall.

Related Articles

Economy
Liz Koh

Budget Winners and Losers

The latest Government budget had something for everyone but while most households will be a few dollars a week better off, there are some clear winners and losers. In the winners’ corner are businesses, those on high incomes, and savers. The biggest losers are property investors who have built large portfolios financed partly by tax rebates.

Read More »

Top Up or Miss Out

The end of June is an important date for KiwiSaver members. The financial year for KiwiSaver runs from 1 July 2009 to 30 June 2010 and if you have contributed at least $1,040 to KiwiSaver during that time, you will be eligible for the full amount of Government tax credit to be paid into your KiwiSaver account in July.

Read More »

Responsible Investing

There is a worldwide trend for investors to want to make a positive contribution to the world by investing in companies that are socially and environmentally responsible. If you are passionate about the effects of climate change, the scarcity of food and water, and social or environmental policies in general, then you will no doubt wish to ensure that the companies in which you invest are going about their business in a manner that is consistent with your views.

Read More »

Helping You Live your retirement To the Max

Keep in touch

Fill in your details and we’ll get back to you in no time.