subject: One Minute Money Lessons: Can You Build Wealth While You Have Debt? [print this page] One Minute Money Lessons: Can You Build Wealth While You Have Debt?
It's Free! Nothing is really free, but if the sales associate is offering free financing, you may be in for a win. First, check that you can't get a better deal if you don't take the free financing. Sometimes, this is the trick. You pay more up front, but don't have to pay the item off for 12 months. Second, make sure that adding this debt to your portfolio does not hurt your credit score. If your debt-to-income ratio is too high (over 30%), it will drag down your score. If you pass these tests and take the free financing, don't fall into their other trap of not paying the final balance in time. A lot can happen in 12 months, so either make payments regularly or have a plan to have that money available when the time comes. If not, you may be in for some pretty steep penalties!
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