Lessons Learned and Impact of loans at a young age

In 2018, I made a financial decision that would stay with me for years—a car loan. At 21 years old, I didn’t think twice about it. Looking back now, it was the first big financial burden I carried, and it taught me lessons about debt, decisions, and the influence of social pressures.

The Pressure to Upgrade When I turned 18, my mum gifted me my first car. It wasn’t flashy or expensive, but it was reliable, and it gave me the freedom I needed. At that age, learning to drive and having your own car feels like a rite of passage. It was more than transportation; it was independence.

For two years, I drove that car without a single issue. It was everything I needed, but as time went on, I started noticing what everyone else around me was doing. Friends and acquaintances were upgrading to newer, more expensive cars. The buzz of “better” became hard to ignore.

The pressure to keep up with what others had—and what I thought I deserved—led me to start looking at cars I couldn’t afford outright. My old car was perfectly fine, but I convinced myself it was time for something new, something better. The Loan Process When I found the car I wanted, I knew trading in my old car would help reduce the cost, but it wasn’t enough to cover the full price. I needed to apply for a loan to cover the remaining £5,000.

The process was shockingly easy. One quick form, a few details, and within a day, the loan was approved. The money appeared in my account almost instantly, and by the end of the week, I had purchased my new car. It felt so seamless that I barely stopped to think about the long-term implications. The Reality of Loan Repayments : The Math. At the time, the monthly repayment of £150 seemed manageable, so I didn’t think much about the long-term impact. However, breaking it down now, my repayments each month without interest were £104. On top of that, £46 in interest was added monthly, making a total of £150 per month. Over the course of four years, the interest alone added up to £2,208, bringing the total repayment to £7,208 for a £5,000 loan.

At 21, I didn’t fully grasp how much that interest would add up or how it would impact my finances over time. All I knew was that at the time I could afford the monthly payment, so I didnt even think about it further. Financial Challenges Along the Way and the Impact of loans at a young age

Over the years, life threw unexpected challenges my way. The COVID-19 pandemic disrupted everything, and like many others, I found myself in a tough financial spot. Payment breaks during this time stretched the loan term further, making the debt feel endless.

The lingering car loan became a constant reminder of my past decisions.

It wasn’t until this November (2024) that I finally made my last repayment. Clearing that debt felt like closing a chapter—one that came with valuable lessons about money, decision-making, and the importance of thinking long-term. What I Learned: Don’t Rush Big Financial Decisions - Looking back, I realize how quickly everything happened. From deciding I wanted a new car to securing a loan and making the purchase, it all unfolded within a week. Taking more time to evaluate whether I truly needed a new car might have saved me from years of repayments.

• Understand the True Cost of a Loan- At 21, I didn’t fully understand how loans worked. I focused on the monthly payment rather than the total amount I’d pay back, including interest. That £5,000 car ended up costing me over £7,200—a price I wouldn’t have agreed to if I had calculated it upfront.

• Beware of Social Pressures - The desire to keep up with others can cloud your judgment. My old car was perfectly fine, but seeing friends and peers upgrade made me feel like I had to do the same. Learning to ignore these external pressures has been a game-changer for my financial habits.

• Plan for the Unexpected - Life is unpredictable. The pandemic and my move to Dubai created financial challenges I couldn’t have anticipated. Building a financial cushion and being mindful of long-term commitments can help mitigate these risks.

• Celebrate Milestones - Paying off this loan was a huge moment for me. It marked the first debt I cleared and gave me a sense of accomplishment that’s hard to describe. It’s a reminder that no matter how overwhelming debt feels, it is possible to overcome it with persistence and discipline. Final Thoughts My first big credit application taught me more than just financial math—it showed me the importance of slowing down, thinking critically, and resisting the urge to compare myself to others.

  If I could go back, I’d remind my 21-year-old self that what I already had was enough. The car I had at the time served its purpose, and upgrading wasn’t worth the financial burden it brought.

  For anyone facing a similar decision, my advice is simple: take your time, do the math, and make choices that align with your long-term goals—not fleeting societal expectations.

  Today, as I sit debt-free from that loan, I feel a mix of relief and gratitude. It’s a milestone that marks the beginning of a new chapter, one where I’m more mindful of my spending and focused on building a secure financial future.