Living On Credit

Extracts from Rocky Bru's
IT’S not how much you earn, but how much you owe, Ted Turner once said. By 1986, he had US$2 billion (RM7.6 billion) in debt (more than some small Third World countries, he proudly admitted), largely due to his ambitious acquisition of MGM. He became one of the most powerful corporate figures in the world.
In the same demented way, some countries become powerful because of the size of their debts. The United States is the biggest debtor nation in the world. In Turner’s book, the US should rule Earth. And the US, we all know, does.What does it mean? It means that huge debts, which used to be a liability, are now a strategy. The theory, that if you can’t repay your RM100,000 loan, you’re in trouble, but if it ’s RM100 million, your banks are in trouble, still applies.I belong to the RM100,000 category, the wage-earners who contribute towards the economy of this country by working hard to ensure that our relatively meagre bank borrowings don’t turn into bad debts.Most of the time, this is not an issue. But there are always occasions when someone from this bank or that finance company calls to remind you that you are “a little behind” in repaying your loans. It could be your loans for the home, car, motorcycle, insurance or credit cards.But you manage, somehow, most times. The times that you don’t, you get into trouble faster than you think. Your friendly lenders send debt collectors or repossessors. Some people try to save their cars and homes by going to the Ah Long. It can be a start of a vicious cycle, which doesn’t end until you lose everything, including your dignity. Some people take more extreme shortcuts to end their debt woes. The other day some of us wage-earners were discussing how much we owe. It was a depressing exercise. All of us borrowed to buy our homes and cars (and motorcycles, too, for some of us).For the roof over our heads, we are all repaying until we reach 55. I have five years to go on the Sorento, which is about the same as the others had on their rides. All of us own one credit card, at least, although several have up to three. All owe the credit card companies something substantial (between RM3,000 and RM15,000). One guy has destroyed his card so that he can’t use it anymore, and he reckons it would take three years to repay the amount he owes (plus interest) if he manages to pay the minimum amount every month.At the end of the discussion, I concluded that we are a borrowing society. Which does not make us special, of course: citizens of other countries face the same problem, too.I believe our problem is going to worsen unless we start addressing certain issues and/or regulate the way business is conducted in some sectors. The credit card is an obvious problem area. When I was just starting out, you had to qualify for a credit card (you had to prove that you earn a certain sum in a year).These days, if you can sign your name and remember your identity card number, you are eligible. On one hand, it ’s great: you have access to credit. On the other hand, most new entrants to the job market will end up working to pay the interest on their credit card debts.People in the kampungs have enjoyed credit facilities from shopkeepers since before most of us were born. It’s a proven rural financing sytem. But I discovered the other day that the interest charged for some of these easy payment schemes can be extortionate.Someone bought a Malaysian-made small-engined motorcycle on a hefty 10 per cent annual interest rate. Some finance companies are allowing you to stretch the repayment scheme for your car to nine years. We all have been taught not to be tempted to own what we can’t possibly afford.But with such generous terms from lenders, including banks and finance companies, more and more Malaysians will not realise they are living beyond their means. Which cannot be good for the economy.
Renung renungkan lah sahabat2 ku...