Money Matters-3
Saving and Borrowing seldom go together! Exceptions are there which we will see later.
If you must borrow, 1. Keep it to the minimum, 2. Borrow for short periods only. 3.Borrow for
essential needs only.
Prefer borrowings for productive purposes rather than for unproductive ones.
Many times, it is a vicious debt trap, leading to more and more borrowings and one would never be
able to come out of it. Credit card debt is an excellent example for this. Do you know the interest
charged in it is the highest ever! Next comes unsecured borrowings, pawn broking. These should be
avoided.
It would be better to sell your asset than taking a loan from pawn broker against the asset, usually gold,
durable assets etc.
Assess your ability to service a debt. It is always your surplus - Earnings & Receipts less expenses and
outgoings.
Exceptions I referred are borrowings for Home, Vehicle, Education. In these cases, you can get
loans at affordable rates. EMIs should be carefully chosen, ( depends on the duration of loans, longer
the duration, lower is the EMI but total interest outgo will be high!). Theses loans are PAYE types.
PAY AS YOU EARN types. Self liquidating in nature. You either earn out of the asset or at least
save on (recurring) expenditure which you would otherwise have to incur. So, it makes sense.
Here again, avoid having multiple loans. I have known cases where people borrow to pa EMIs,
surest way to ge into DEBT TRAP!
Keep this in mind. Bye until next visit.
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