Borrowing for consumption is more expensive than you think

Many loan advertisements encourage the spending of “future money” (i.e. you do not have the cash at hand but acquire it through borrowing) and claim that dreams can be achieved by borrowing, e.g. to purchase trendy products, travel abroad, enjoy luxuries, etc. However, borrowing to spend on unnecessary consumption is very questionable. In addition to paying back the principal amount, there are also interest, handling charges and annual fees to pay. All these can add to the burden on the borrower in terms of increased monthly expenses. For example, if you borrow HK$10,000 to buy a new smartphone and pay 20% interest per year, the phone will in fact cost you HK$12,000. Furthermore, borrowing for consumption can become habitual, resulting in a worsening debt situation. As such, even if you can afford to do so, do not casually take out a loan.