HARLINGEN, Texas (KVEO) — As unemployment numbers continue to remain high, some families may choose to take out a loan to buy Christmas gifts.
One local economist says taking out a loan for Christmas is not a good idea. Professor at South Texas College Teo Sepulveda, Economist, suggests loans should be saved and used only when making long-term investments, such as home improvements.
Sepulveda says loans should be used for buying something or investing in something which will eventually become more valuable, giving the lender a profit and borrow more assets.
When you use a loan to buy gifts, Sepulveda says it actually makes you less wealthy, and not something he recommends.
“The most recommendable thing is you know what kids and the rest of the family guys were in difficult times right now, let’s just postpone consumption,” says Sepulveda.
He adds using a loan to buy gifts like toys and video game counsoles add little value to your assests.
The pandemics’ effects on the economy have also created more uncertainty for families to easily pay back a loan, and these loans can also have a high-interest rate. Having too many loans or too much credit could also impact your credit score.
“That’s just a whole lot of stress that families don’t need in a situation like this I would recommend completely against it. We have to think about long-term projects, sometimes the simplest projects is just to save money and that’s it,” says Sepulveda.
Adding to the stress Sepulveda says would be reading and knowing the terms and conditions of a loan.
If you do take out a loan Sepulveda says to look for the lowest interest rates, and see if you can pay back the loan early to avoid interest charges, taking your time before making a decision about a loan.
In difficult times, Sepulveda says consumer goods are not necessary and it’s better to save than spend this holiday season.