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vahntitrio t1_j254v5h wrote

Reply to comment by Tr4c3gaming in ELI5: Why you shouldn't borrow from loan sharks by Cold_Chemical5151

It also doesn't need to be a loan shark to get into a debt spiral. Things like buying a new car on the 7 year loan with very little money down can make your $40k vehicle cost closer to $52k, whereas taking a 4 year loan and putting more down puts the cost closer to $42k.

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maveric_gamer t1_j25w8p1 wrote

That's bad, but it's not really a spiral if you do things like keep a job and make sure that your monthly payments for everything are lower than your income each month. The problem with a lot of these loans is that they're structured to almost never pay off the principle of the loan, and the interest keeps compounding.

The really bad legal examples IMO are student loans - they're huge loans that even if you get your degree you're not likely to be able to afford a payment that would pay them off in a reasonable time, and so that's why you end up with stories like "I borrowed $30,000 to go to college, and after 10 years of $500/month payments, I now only owe $47,000" (I'm making up numbers for the quote but real examples exist for this)

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