Recently I came across this quote, and it made me think about interest rates and how they affect our lives.
"Interest [on debt] never sleeps nor sickens nor dies; it never goes to the hospital; it works on Sundays and holidays; it never takes a vacation; it never visits nor travels; it takes no pleasure; it is never laid off
work nor discharged from employment; it never works on reduced hours. … "
– J. Reuben Clark, Jr. (1871-1961)
American lawyer, statesman and clergyman
When interest rates are high, income from shares is usually low. When interest rates are low, share income increases.
High interest rates can make buying your own home, or even keeping up with the mortgage payments, very difficult or even impossible.
Banks are often guilty of lending large sums to people, without really considering whether or not they can afford the repayments. The result of this can lead to repossession of their home, car, or other goods.
The sub-prime crisis is a result of over-lending by the banks. This has caused a great deal of heartache and financial loss all around the world.
Credit card debt is notorious for being at high rates at the best of times, so when the interest rate climbs, so does credit card debt. This, in turn, leads to difficulty in meeting the monthly payments, especially if the card has been used to its maximum extent.
If you need a card, it's a better idea to have a debit card, which uses your own money. If you are good at managing your cash, you can have a small overdraft linked to this card, to tide you over in an emergency. Of course, it's better never to use this facility at all.
I'd advise anyone to think very carefully before borrowing any amount of money, either from a bank, or any other type of financial institution. Store cards and credit cards can become traps for the unwary. Store cards in particular are well known for having very high rates of interest, which can very quickly mount up.
Work out a budget, know how much you can afford, and work within it. Be sensible with your money, and keep within your income – that way, you will not lose anything, particularly your self-respect.