Before borrowing money you should consider whether it is the right decision or not. Over the years we have been used to taking loans whenever we need to purchase. However, Loans are two-edged swords. Of course it makes your life easy, but you should consider how it will affect your finances.
Borrowing means that you have to pay back in a time frame. Does your financial position allow you? Ask yourself these basic questions before borrowing.
- Do you really want to buy? – This is the most important question. Sometimes we are led in by advertisements to believe that the article we are buying is a necessity. You can delay most of the purchases till you have the cash. If you are motivated to buy then depend on your saving skills rather than a loan.
- Can you make the repayment? – Before borrowing financial assessment is required. How much disposable income you have? You should never borrow if you will find it difficult to pay. Even if you can pay it should not drain you. So, be careful about the repayment plan you are getting into.
- How soon can you be debt free? – Freedom from debt burden makes you stress free. You should always assess how soon you can be debt free i.e. how soon you can repay. Loan is not income but liability for you.
- What if you face financial emergency? – Sometimes financial emergency takes away your ability to pay. It can be loss of pay, or a burglary. You need to take all things in consideration. Also, have you got enough leverage in your bank to pay back if emergency hits? Be very clear on these points before you take a loan.
Loans if unpaid can take happiness away from your lives. So, assess, re-assess and only if it is unavoidable take a loan. These are difficult time so more care is required.