To not think loans for luxury items are a good idea?

[ReallyBadEyeDeer]

As in expensive watches, designer handbag, sports car, aesthetic surgery.

Things that someone might really really want and arguably could make them much happier in life, but involve taking a bank loan to pay over a length of time.

Even if you do have the income to pay it off monthly without causing financial strain. What if something changes in future?

That's the risk you have to accept. If you want something so badly that you need a loan to get it, only a fool doesn't factor in possible changes in their financial circumstances.

However, if you do this and you reckon you will always be able to meet the repayments, how is a luxury item any different from any other item bought via a loan?

It's pathetic. I'd only ever get into debt for essential items. Utterly pathetic to get into debt because you're desperate to look rich.

I think it depends on the circumstances. There are times when taking on debt is financially the better decision. If you can get a better interest rate on the loan than you do in savings then it makes financial sense to take the loan and leave your money in savings earning interest. Also, I know people who use Klarna for online shopping, as they order multiple sizes, but will only keep one, so they only need to pay for the items they need when it comes time to settle up.

For some people it’s a risk, and not one I’d be comfortable taking, but everyone’s attitude to risk is different. Whether the purchase is a luxury or not doesn’t impact on the borrowers ability to pay the loan back though.

I’m torn. I think obviously you don’t know what the future holds and before it’s paid off you may lose your job or be in a situation where you’re no longer able to afford to pay it. But at the same time, life is short. So many people will never be able to afford ‘luxury’ things, so being able to put it on a payment plan over the course of a few years I don’t see an issue if it’s within budget.

Do you just mean loans, or do you include credit cards and buy now pay later schemes-Klarna and the like? Personally I think they are all bloody awful, but some are dressed up as more acceptable than others.

If you need to use these facilities then fine- but they should be for essentials, not luxury items in my opinion. I’ve seen too many people get into mischief with them

No an actual loan directly from the bank.

For a Rolex it would probably be worth it as they go up in value so much but I wouldn't do it.

I have no idea why people would want 'luxury' items or cosmetic surgery in the first place, but if they do, they should pay outright for them or save up, not take out loans they may never be able to pay back.

But this makes no sense - they've paid for the luxury item + additional costs in interest over the duration of the payment plan. They'd be better off saving money each month to go towards a luxury item once they have the funds to pay for it, rather than buy now and pay (substantially more) later.

I've always been very debt cautious though - the only good type of loan in my view is one that will ultimately improve your financial situation (e.g. a (sensible i.e. not overstretched) mortgage, or buying a reliable (not luxury!) car to be able to commute to work in, or buying tools for your trade etc.). Anything else, you'll be paying out your eyeballs just for the convenience of getting it earlier.

I agree with you OP. I have never had any debt except for mortgage.

I wouldn't even take a loan for a car. Was on the bus til I had enough money saved up for one lol!

Generally, no. But the arbitrage opportunities on luxury watches from a retail dealer to be flipped on the grey market would be savvy.

I agree with you to an extent. If you have to pay for it in installments, you probably can't really afford it. Especially considering things like jewellery and watches mostly greatly depreciate in value over time, it seems silly to get into debt for a bauble. That said, if the repayments are within budget, why not, I guess?

I mostly agree, but also think sometimes a bit of a treat won't hurt. I.e. we bought a PS5 (DP and I are avid gamers) between us, but I added it on to my monthly phone plan, at an additional £40 a month for a year. That was easy and felt like it was paid off in no time.

Loans generally can be a bad idea...

I couldn't get worked up about this for one purchase that is for something you've always wanted, especially since designer watches and bags are often life-time items. Multiple items, however, no.

Foolish, and I'd have thought unlikely to truly 'make them much happier in life'.

The PS5 example is maybe a bit different because presumably it provided hours of engaged entertainment, not just a 'thing'.

I completely agree. Taking on debt is stealing from your future income, seems silly to do that for something frivolous, especially something that would depreciate. Perhaps an expensive watch would retain some value to sell, should you need to?

So many people will never be able to afford ‘luxury’ things
Ok. Then they can't have them. People don't have to have luxury items. That's why they are luxurious

so being able to put it on a payment plan over the course of a few years I don’t see an issue if it’s within budget

It isn't 'within budget' if you can't afford it.

Bad idea.

Mortgage, perhaps a loan for some essential house maintenance such as a boiler or fixing a damp problem, not otherwise.

If you are that desperate for a sports car or handbag, I would suggest you give your head a wobble.

Ideally nobody would use credit, but if someone takes a calculated decision that having an item now means they gain enjoyment over time (eg hobby expenses) or they need something and might as well have a decent item over buying twice and losing out (eg cars, kitchen appliances) then it's each to their own. I wouldn't say there's something morally worse about someone using credit responsibly in some circumstances.

Clothes, jewellery, designer bags, etc I struggle to see the justification though.

Where do you stand on car loans?

I think car loans are fine although we don't have any. Dh has a company car and we bought my car and DD's car outright. I think it's daft to get massive SUVs when you don't need them.

I think it is irrational, unless it is an item that will increase in value.

I'm pretty debt adverse, and wouldn't take out a loan for any of those things personally.

But I also agree life is short, enjoy it while you can. So if it's taken on with eyes open, with a realistic plan to pay down and an understanding of how much interest it will cost, then people can plan their own finances as they wish. With the exception of cosmetic surgery, home improvements etc, anything with a value high enough to need a sizable loan over a long time will likely have a resale value so could be sold as damage limitation in the event of a big life change.

Of course it's not a good idea. Loans should really only be used for very big ticket but essential items which reasonably nobody can save up for, basically houses. I'm not even keen on car loans myself. But pretty conservative with money, we very much live within means going without if needed.