Beware the high cost of money

CNMI consumers are currently experiencing tremendous inflation. The price of gas is going up with record high oil prices in the international market. The garment-shipping subsidy has vanished with the collapse of our garment industry. Imported goods cost more because of the increased cost of transportation and fuel. Federal minimum wage hikes get passed on to consumers. With the exodus of labor and the diminishing population base, the CNMI is not benefiting from better economics of scale. Prices are rising and CNMI consumers tend to be very sensitive to rising costs. This is true when it comes to most goods and commodities, but there is one product that many local consumers tend to overlook: money.

When it comes to the price of gasoline at the pump, most local CNMI consumers tend to become very concerned. Most of us are very conscious of every increase at the pump, even if it’s just 20 or 30 cents. But when a predatory lender offers to charge you thirty percent in annual interest for a loan, many CNMI consumers don’t even think twice about signing a financially damaging loan contract. To add insult to injury, many CNMI consumers also allow themselves to be sold on expensive insurance products they may not need. They get ripped off on the loan and they get ripped off again on unnecessary and expensive insurance products on top of the loan. With the exception of a private mortgage loan, loan insurance is optional. Make sure you have adequate term life insurance and skip the expensive credit life insurance.

During this difficult period of inflation, I advise all CNMI consumers to be very careful about paying too much for money. Money is just another commodity and we should all be sensitive to the cost of money. Avoid borrowing money from a non-FDIC-insured bank. If you need a loan, go to the legitimate traditional banks first. If it takes a few days to get a loan from a bank, be patient. Waiting a few days is much better than getting a quick loan at an outrageous interest rate.

For personal loans, there is really no good reason to secure a loan at a rate of more than ten percent a year, with decent credit. A mortgage loan should fall somewhere between five and eight percent. An automobile loan could be as low as 3.5 percent. See the Federal Pentagon Credit Union website at www.penfed.org, which serves CNMI residents.

If you do not qualify for a loan at a bank, work hard to improve your credit profile so that you can eventually qualify for a reasonable loan at a bank. Do not rely on the predatory lenders.

It makes little sense to scream and holler about another increase in the price of gas and then turn right around and voluntarily sign a contract with a predatory lender for a thirty percent annual rate, bringing you deeper in the red.