Hello guys,
Welcome to our new blog post. Do you know that there are many people who live their lives in depression just because of their financial condition and their full-of-debt life? Believe it or not, it's really a big problem, In this post, we will discuss types of loans and their effects on middle-class people. For some people, loans are like a boon in their life whereas for others it is as bad as a curse.
Also Read: How To Become Financially Independent?
So let's start,
According to a report of IFC - International Finance Corporation, in India, more than 90% of the population is earning less than ₹25000 per month. And a lot of people take loans for their daily uses. People take different types of loans which include home loans, car loans, personal loans and many more.
Many of them are those who take loans for their personal luxurious life. People treat loans as their wallets but when it is time to pay back the dues then they cry about their bad luck and curse that bad time when they happily accepted the loan.
When we come to buy a personal house for us or for our family then we require a lot of money in the bank. But in most cases, people usually do not have that much income to buy a house. And because of that, they ask for Loans. But loans should be taken over good interest rates which lie in the range of five to seven per cent. Loans for houses can be acceptable to you but for apartments or flats, you must not look for a loan. You will get caught into a really big problem.
If you are taking a loan to buy a car then it might be a good or bad decision for you, it totally depends on your earnings and your needs. If you are a businessman having a luxurious car makes a positive attitude on your clients. And if you belong to a middle-class family or do not have such a great income to buy a luxurious car then you must not do the mistake which people normally do. Don't take loans for objects which you can not buy using your income. This is the golden statement to be remembered while looking for loans.
If you are taking an education loan for your further studies and the rate of interest is not so high and you are confident that after the course, degree or diploma you can earn a good amount of money and can pay the loan amount easily then you are making a wise decision. But if you are not so good at your studies and taking a very big loan and are not so confident about getting a job then you should not probably try for any educational loan. You can try another option either like some business, online source of earning etc.
If you are taking a loan for your personal luxurious life then no doubt you are taking the worst decision of your life. If you are buying an iPhone that costs ₹70000($900+) on EMI then think again about what you are doing, the major portion of your income will get spent on paying EMI. Or if you are taking a loan for a trip, a luxurious restaurant etc. while knowing the interest rates on it which are 24%, 36% and much more. It means that the amount of the loan will get increased by 1/4 or 1/3 after a year. So take your decision wisely and control your expenses and spend according to your income.
If you have a business running perfectly and you are taking a loan to expand your business then it is definitely the right decision. As you have a business module running very well then the loan amount can be used to grow your business across different places and you can easily pay the instalments of your loan as you are generating good income through your business module.
In India, if your income is above one lac per month then you are eligible to use a credit card of limit 2-3lac. If there is no emergency then please avoid the use of a credit card because when you use it and are unable to pay the amount on time then you will have to pay the amount+penalty on it. And the bank will spread a bait around you, bank will say that once you will pay ₹20000-30000 then you will not have to pay the amount of plenty and you will be eligible to pay the rest amount in form of EMI and you will get shocked when you hear the amount of interest on it. It is 24%-36% which is a huge amount and bank earns from you. So don't use a credit card if there is no emergency.
Side Effects Of Taking Loans:
So, they go to banks or people to request for lending them money. They take that money in instalments which are to be paid monthly or quarterly. But sometimes, they get very bad situations like any medical issues or fire in the building or loss to any asset. And they spend their savings to recover the loss. But now they realise that they have to pay the instalment. Now, in this situation, some people handle this situation by taking another loan to pay the instalment and that's how they get trapped in the loop of paying loans or recovering debts. Some of them maintain to handle the situation but not all. People who get totally confused about how to pay the dues get frustrated and take some wrong actions.
Solution:
When someone wants any financial help from other people or banks, they should first think again about that is it a good reason to take the loan or is it necessary to do something which requires a lot of money. Ask yourself- is it necessary to spend that much money on anything right now or can I wait for the right time? Right time means the time when you have some money in your hand when taking loans because if there will be any situation in the future when you can not use your income to pay instalments, you will use your savings to pay that. So that you will not be charged extra on my interest or be summoned by the court for not paying instalments over a long period.
How we can set our life free from loans:
- First of all, you have to write down all the loans and their interest rate. Then pay the loan with the highest interest rate first with all your efforts.
- Eliminate non-essential things to buy. Don't buy to show off.
- Do a part-time job to pay these loans.
- Start earning from social media.
- Sell all unnecessary items. (If anything that is not used in the last 12 months, then it might be useless).
"If You Buy Things That You Don't Need Then You Will Have To Sell Those Things That You Need'' - WARREN BUFFET
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