A Friday Chat About Loans

Photo credit: Patrick, CC BY 2.0.

NICOLE: Happy Friday!

KAREN: Happy Friday! and happy First of Christmas! I’m far too excited for December, I brought decorations into work for my desk today and everything.

NICOLE: Hahahaha the first day of the Christmas season is the day after Thanksgiving, ’round my parts. I’ve been wearing Christmas-themed earrings for a week.

KAREN: We don’t have Thanksgiving in Dublin, so if I don’t start from the first of December the nearest other holiday to count from is Halloween—which is kind of a long way to be Christmassy, although I’ve definitely done it before!

NICOLE: Did you buy new decorations for your desk, or recycle old ones?

KAREN: They’re the same ones I have every year, little penguin ornaments I got from my parents one Christmas plus a tiny Christmas tree my girlfriend bought me so they could sit around it.

NICOLE: Awwwwwwww.

KAREN: By tiny I mean TINY, it’s maybe eight inches tall. but it sort of sheds glitter everywhere so I love it anyway.

NICOLE: It leaves a bit of Christmas wherever it goes.

KAREN: Exactly!

NICOLE: So when you pitched yourself as a Friday Chatter you said something really interesting about the loans you currently have taken out. Would you like to recap that for our readers?

KAREN: Ahh yes, sure! I’m sometimes a bit unsure about this outlook because it seems a bit too cheerful for something that stresses out basically everyone, but it’s the way my parents explained loans to me.

I’m financing my part-time college degree with a series of small loans, because from my point of view, loans are like saving, except you get the thing you want at the start, instead of the end.

So I’m in college part-time at the moment, and I’m paying for it in a series of small loans. I could just save up for each portion and then pay it in cash, but from my point of view I’d be doing the same thing, I’d just get to take my classes later that way.

NICOLE: I love this perspective. I always heard that loans were to be avoided because THEY COST MORE MONEY (insert scary music) but time is also valuable, and sometimes getting something sooner means you have more opportunity to do something with it. Like an education or a car or a house.

KAREN: Exactly! I’d rather pay a little bit extra and have whatever the thing is right from when I need it, or from when it becomes useful. It’s like, “You can pay this extra fee to get your degree two years earlier.” No problem! I’ll pay that!

NICOLE: How much are your loans, if you don’t mind sharing?

KAREN: I have two out at the moment. One is an interest-free loan for my laptop, because I needed a decent one to start working at my company (we all use our own computers), which is €1,500 over five years. It’s only €41 a month so I basically ignore it and let it tick away!

Then my degree is on a bit of a weird schedule, but basically our modules cost €3,200 every ten months. So I took out a €6,400 loan to cover my first 1.5-ish years of classes, and then will get another afterwards.

That €6,400 is actually a five-year loan, which if you look at the timescales doesn’t look right! But I did that because I wanted a lower minimum payment, so I could then throw extra money at it at a rate that suited me. I started classes in January 2017 and that loan began repayments December 2016, and it’s on schedule to be fully paid back by May 2018.

NICOLE: Congratulations!

KAREN: Then I’ll just do the same again!

NICOLE: Does the fact that you’ll be spending more money over the long term (than you would have spent if you paid up-front) bother you, or is it more like “my monthly payments are affordable, and that’s all that matters?”

KAREN: It doesn’t bother me—I’m always more concerned about what the repayment is than what the total cost is. I just see it as a recurring fee until it’s gone. I’ve never found that weird to do—does anyone ever calculate how much total they’ve paid to their internet company, or to Spotify or whatever? It feels the same to me.

I do all my finances on a monthly basis, so if I can afford it in the monthly paycheck, that’s all I need.

NICOLE: I guess the difference with Spotify is it’s a subscription, but even Spotify gives you the opportunity to pay less if you buy a year of Spotify in advance, vs. higher if you’re paying month to month. So maybe it is more similar than we realize.

KAREN: Does that mean we can consider me ‘subscribed to college’?

NICOLE: I love it. Any last thoughts on loans for The Billfold before we wrap up the chat?

KAREN: Oh gosh, I don’t know! I guess my only advice is: if you are allowed make extra payments with no penalty, then there’s no such thing as too small a payment. I’ve been known to throw a fiver at it, even—but it all adds up!

NICOLE: For sure. Happy Friday and happy first day of Christmas, then! Have good weekends, all! Thanks for chatting!

KAREN: Thank you for having me! Happy Friday to you and everyone!

Want to be part of a future Friday Chat? Email nicole@thebillfold.com.