Jaspreet Singh’s Warning for Your Next Shopping Trip

Jaspreet Singh is a popular financial influencer who champions common sense financial practices. So why does he say you shouldn’t finance your next big purchase even if the store offers 0% APR?

Here’s his explanation.

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Buying a Sofa Becomes a Lesson

Singh says that he and his wife recently went to a furniture store to buy a sofa. They found an expensive one they liked and decided to buy it.

At this point, the sales representative told the couple they could finance the sofa at 0% APR for 12 months. When Singh declined, the salesperson said they’d also get cash back on the purchase. That meant they’d essentially get paid if they decided to finance.

Singh and his wife still declined the offer. To explain why, he shares three key takeaways about financing that everyone should know.

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Singh’s 3 Takeaways About Financing

Here’s why Jaspreet Singh and his wife declined to finance their new sofa, even though they could’ve made money by doing so.

Financing Is Profitable

First, Singh says to recognize that financing — even at 0% APR — is very profitable for businesses. They wouldn’t offer deals like this if it wasn’t. It falls to the customer to figure out how the business stands to make money.

Singh gives two main reasons why financing at any APR is profitable to a company. One is that offering financing encourages customers to buy more.

If Singh had financed his sofa, he may have been more likely to buy a table he liked as well. Even though he didn’t have the budget to purchase both items that day, the financing offer would have let him take each home. But then he would have been stuck with high monthly payments for the furniture, which could have delayed his other goals.

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Companies also recognize that many customers won’t pay off the items they finance before their promotional APR expires. When that happens, customers end up paying extremely high interest rates and fines, which become profits to the company that offered the financing agreement.

In Singh’s case, the 0% APR deal only lasted 12 months. If he didn’t pay the sofa off within that time frame, he would’ve ended up paying significantly more for it because of the fines and penalties.

Don’t Be the Majority

Jaspreet Singh also reminds consumers not to do what the majority does just because it’s the majority action.

For example, in the sofa anecdote he shares, the salesperson told Singh and his wife that almost every customer chooses the financing option. But Singh recognized that this didn’t mean financing was right for him.

He worried about adding another monthly payment to his budget and what might happen if his financial situation changed during repayment. Singh reasoned that he’d rather own the couch outright immediately. That way, he could at least resell it if his finances took a turn for the worse.

This is a lesson that Singh says everyone should apply to financial decisions. You don’t have to open up credit cards or finance a lavish lifestyle with debt just because it’s becoming more common to do those things.

Instead, he recommends normalizing building wealth for yourself and only buying things that you can afford. If you do this over time, Singh says you’ll end up in a much better position over the long run.

Be the Master of Your Wallet

Finally, Singh’s last lesson from this experience was a reminder to be the master of your wallet. In other words, don’t let other people influence you into spending money you can’t afford to lose or financing purchasing that you wouldn’t buy otherwise.

Financial wellness is ultimately a personal decision. But that doesn’t necessarily mean you need to live like a pauper.

Instead of buying a brand-new expensive sofa, you can look for a cheaper alternative. It might not be your dream couch, but you may be able to find a used option that’s very close.

Over time, as you continue making smart financial decisions, you’ll be able to afford your dream sofa eventually. Rushing the purchase through financing is risky and could delay you from reaching your long-term goals.

The Bottom Line

You might not be in the market for an expensive couch like Jaspreet Singh. But maybe you’re deciding whether to finance the purchase of a nice car or an expensive trip. The lessons would still apply.

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This article originally appeared on GOBankingRates.com: Jaspreet Singh’s Warning for Your Next Shopping Trip