The road to financial indepenedence requires an understanding of the power of cash over credit. Ever here the term cash is king? Maybe you never truly understood what that meant but I’m about to explain what it means.
First, I’ll outline the credit process. Step one: you have to find some lenders. This can be a bank, credit card company, private lender, hard money lender or a friend. That in of itself can take a lot of time and research. After that, you have understand the interest rate you will be charged, the terms of the agreement and the length of the loan period. For credit cards, it can be almost infinite but for mortgages, student loans or car loans, the term is fixed in years or months. For home loans, it can typically be 15 or 30 years, for car loan five years. Next, you will have to provide all sorts of documentation to a lender for them to approve you and I mean every document you own that provides proof of your money and assets. Bank statements, tax filing information, paycheck stubs, investment account statements, all other assets you own (antiques, art, jewelry) that are really valuable. They will also check your credit. The list goes on and on. Then you have to wait and pray you get approved. This process can easily take five days and it could be thirty days before you get any money. You have to ask yourself if it’s worth the time and headache to get money via credit. You then have to think about how much interest you’ll pay just to buy the thing you’ll need. Lastly, you have to understand that the more debt you take on, the less you’ll be able to get later. If you already have a lot of debt and want to buy a house, good luck. So in terms of savings strategies, credit doesn’t sound that good, right? Now on to cash.
Cash requires none of the time credit does. The money is in your account so there’s no approval process. You’re approved. Talk about a no doc loan! Once a contract is signed, you spend 10 minutes at your bank and bring a certified check to the closing or the dealership For lower priced items you can just write a check or pay cash on the spot and save on credit card interest too. You won’t have to pay any interest on you purchase and seller’s will salivate knowing you’re a cash buying. You can typically get a better deal on price with cash purchases. You can easily get a 20% reduction on a house purchase this way. Just think how ecstatic the seller will be when they hear the offer is from an all cash buyer and they can close in ten days! They know the deal will close and will trade the price for the stress of waiting or someone else being denied a loan. How you become rich and famous? Saving on interest and buying things with an all cash discount is one way to get there.