Personal Finance: How much money do we lose when we accept loans or credit?

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One week ago we went to the clinic where I’ll give birth to our daughter to discuss the pricing, the conditions etc. We also noticed there was a Stem Cells Bank office and we looked for some details regarding this, too. We do want to store some of the umbilical cord blood, so it was a discussing we wanted to have. After telling us how the entire process works, the lady presented us with 4 ways to pay for the procedure.

We could choose from paying the entire sum at once (a part when the blood is taken and the rest in 2-3 weeks, if the blood is OK to be stored) or choose from a ‘loan like’ plan that would stretch over the 20 years the cells will be stored as per this contract. My husband, who has a natural aversion towards any kind of debt told the lady we don’t have payments for anything, so we’re clearly not planning on getting into debt over this either.

personal finance credit

Armed with all the information we took few days to make the final decision, until I was about to discuss it with my OBGYN, whom I trust not only as my doctor, but also as a mother. On Friday I went for my 30 week checkup and asked her about the procedure and she was even able to get us a discount.

So today we went and signed the papers. Here are the costs we’ll have and the big difference between paying the money at once and taking the ‘loan’ (we use Euro here, but I’ll ‘translate’ the money into dollars, so that it’s easier for most my readers to see how it looks).

Our payment plan

  • The entire contract would cost us around $1.8K.
  • We pay a part on the day I give birth (or 2-3 days after) and the rest when our results come, if bothย  my blood and the baby’s is OK and the process can continue.
  • Since we’re paying everything, we also received a $200 discount and we’ll have another type of cells stored in the same price (would cost us another $480). Anyway, just taking into account the main discount, the entire contract stops at around $1.5K. That’s all we have to pay (this also includes the VAT, which in Romania is 24%, almost a quarter of the sum).

The more ‘relaxed’ plan

  • We’d pay around $1.2K in the first 3 months for the initial procedure.
  • Then the total we’d pay in the 20 years in which the contract is valid would be $1.5K (in this case the VAT is not included anymore, so it gets paid each year, with the rate). The grand total is at around $2.7K

So, by not taking a ‘loan’, we’re getting the same thing for 1.2K less, which is not that bad.

This does make sense, if I think back at my car loan, taken back in 2008. My car cost 13K Euro at the dealership. If I had the money, I’m sure I could have gotten a good deal, at least 1 thousand off (or even more, from what some of my friends who paid for their cars in cash told me).

Instead, I had to make a down payment of 3K euro and then paid the 13K in 48 fixed rates. I was also forced by the contract to also get a very expensive premium insurance, which added 2.4K more to the entire contract.

So, instead of paying 13K (or even less, maybe 11K), I paid 18.4K Euro for my car, which clearly is not that big or fancy to warrant such a price. It’s almost double of what I could have gotten had I bothered save the money and not rely on a loan.

This is probably the reason why I keep on preaching that we need to get our act together and stop taking the easy route of loans and credit. Yes, it’s nice to pay ‘less’ upfront and have some ‘manageable’ monthly/yearly rates, but the problem is that you will not get the same good deals you’d get when paying for the object/service at once.

Just the fact we did make an effort to save in the past months (even with the increased costs and expenses a pregnancy and upcoming birth gave us), allows us to get a great deal (the discount is not available for the ‘credit’ plan), we don’t have to cover the VAT, which, at 24% is really burning one’s pocket, and we clearly don’t have to pay quite a lot extra on the yearly payments.

When you have the money in your hands you have the power. You can haggle, you can refuse to take on a plan, you can be cheeky enough to ask for a discount. There are more companies in the stem cells banking business (as you can imagine) and I’m sure that, if we didn’t like the terms, someone would ‘fight’ to get our money.

When you’re taking a loan/credit you’re no longer having the power. When I signed for my car loan I had to take on any of their conditions. They didn’t really care too much about me, let’s say there were others lining up for a loan. But, if I had the money ready for the car, you can imagine the entire process would have been different. Knowing that another dealership would get ALL my money would have changed the way my deal went through.

I cannot change the past and shouldn’t cry over things that were done almost 6 years ago. But it did teach me a lesson and today I was very happy to see what an advantage saving money and being prepared for a purchase can bring.

10 COMMENTS

  1. Because of the high costs– I think we ended up donating cord blood, but elected not to save stem cells for later. I would think that this industry would be primed for some competition here at some point to that could help drive costs down.

    • It is indeed very steep. Imagine that in my country many people work for 300 Euro wages (which is already considered a good one, many have just 200) and the procedure would cost 1300 (1150 in our case with the discount). Some people work for half an year for this money ๐Ÿ™

  2. There was a time when I would easily fall into the trap of taking the easy route via loans thinking that the payment plan was manageable. How I wish I had been wiser but that’s all in the past. Never again shall I be as vulnerable. I must stick to my goal of becoming debt-free.

    • Well, the price is SO STEEP for us that they had to come up with a payment plan, otherwise most people couldn’t afford it. But of course, just as with any other payment plans, you do end up paying way more than the ‘normal’ price.

    • I don’t like to haggle either and in some cases it’s clearly my loss. We were lucky that the lady told us my doctor, who’s been working with that clinic for some years now, can give us the voucher. Otherwise we’d have paid the full price, 150 euro more.

  3. I have made many mistakes when it comes to taking on loans. The only way I have found to avoid taking on loans that cost me way to much is just avoid loans all together. If I want to buy something I start saving money until I can pay for it straight out. I find it is easier to save money when you don’t have loan payments to worry about.

    • Yeah and you do get better prices, which saves you money on the long run. With the money saved you can do something else. In our case, we can cover most of the birth costs just by not taking the ‘loan’.

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