Consumer loans are loans you obtain to pay for items that are fairly expensive; you usually don’t need these items (at least not urgently). Such items include electronics, automobiles, furniture, and recreational vehicles.

Consumer loans are very expensive and should rarely be used. They encourage you to buy now rather than to save for the future. Committing future earnings to today’s consumption may keep you from achieving more important long-term personal goals.

Consumer loans also reduce the amount of money you can save for your goals because they require you to pay interest with money you might otherwise have saved and invested. Most importantly, consumer loans are almost always unnecessary, unless their purpose is to pay for an education or a home.

When should you obtain a consumer loan? The following are a few questions to ask yourself if you are thinking of borrowing:

1. Do I really need to make this purchase? Is this a need or a want? Separate these two categories. 
2. Is this item in your budget and/or your financial plan? Most items should be saved for, not borrowed for.
3. Can I pay for this item without borrowing? What is the after-tax cost of borrowing versus the after-tax cost of using savings and losing your return on those savings? Compare these two alternatives.
4. What is the all-in cost of this loan, including its impact on your other goals? Can you maintain sufficient liquidity and still achieve your other goals? Choose wisely.
5. Will this purchase bring you closer to your personal goals or take you farther away from them? If the purchase brings you closer to your goals, including your goal of obedience to the Lord’s commandments (including the commandment to get out of debt), make the purchase. If the purchase takes you further away from your goals, don’t make it.

If you can answer these questions honestly, it will be much easier to determine whether you should take out a consumer loan or not.