Why is it that when you borrow money from your bank you feel
some sort of guilt when you look at your wallet or your ATM card? Why is this
feeling not the same when you just signed a contract with your bank stating the
equity you are giving them for your home in exchange of financing? These two
should invoke similar emotion because they both cost you in the same manner.
However, equity pushes the border a bit more, surprisingly.
1. Debt is Less Expensive
When you take on debt, you are fighting against interest
rates and payment deadlines. When you couldn’t pay, the banks would shun you or
give you high interest deals unless you clear your name in the register and improve
your credit rating. If you take on equity instead, you’re giving up part of
your property forever. With debt, the banks have nothing on you.
2. Paying Interest Lowers Tax Burden
Most Britons take a loan or mortgage instead of securing
their loans with their vehicles because it helps lower their tax burden. This
is why most homebuyers re-mortgage their home every five years. When you pay
more to interest rates, these amounts are tax-deductible.
3. Improve Discipline
It’s a different matter when you’re spending money with a
credit card. Shop now, pay later, most would say. But when you spend actual
money coming from your bank, which you have to pay regularly, you develop the discipline
necessary to handle even a credit card properly
