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If You Are Borrowing Money Read This

  Fri, Dec 03, 2017     written by : CSF-Team
Borrowing Money

Money, today, is the unchallenged primary object needed for survival. Just the definition of "survival" itself has changed. For instance, in the olden days people would say basic necessities like unadulterated food, portable water, clean air and a safe shelter were sufficient to survive. But today if you ask a teenager they will say they cannot survive without their smart phone and social platforms, even if doomsday was around the corner.

So you can say "survival" has a new meaning and to "survive" in today's world you need more money than you probably did a couple of decades ago.

People knock on lenders’ doors to bridge a gap created by a surge in demand for money but an unequal increase in supply of opportunities. In simple terms, to meet their wants people borrow money. And if you have too, then you will certainly be able to relate to one of our cases listed henceforth.

Borrowing

Ritesh Rao (Pune)

Ritesh took a home loan in August, 2008. Based on his income he could afford a house much smaller. But he decided to stretch to his maximum capacity only to buy a larger house. Ritesh was sure he would be promoted at work in the following appraisal. Unfortunately with the global financial slowdown from December 2008, his prospects of getting a raise died.

After their twins were born his wife could not continue work, tightening the home budget even further.

Soon many people from his office were fired and he just consoled himself thinking at least he wasn't jobless. Clearly, he had counted his chickens before they hatched. With no promotion or raise at work Ritesh now felt a squeeze on savings.

It can be tempting to borrow extra funds only but they translate into extra burden. Ritesh miscalculated his income by hoping for a raise. This is a grave mistake that a lot of us do.

The raise or expected money may or may not come. Be realistic about your repayment capacity. If you are hoping to get extra income in future, then wait for that to become a reality before it figures in your scheme of things.

Things have changed over the years and Ritesh has learnt his lesson. Now he calculates his need and only borrows what he can afford to repay.

Bhavesh Patel (Vadodra)

The only thing Bhavesh couldn't resist was investing in the share market. He liquidated most of his long term investments to trade in the stock market. On the other hand, he was never careful with his expenses. He had a free hand and spent without a care in the world. Soon, he took two personal loans to pay off his towering credit card bills and also took another car loan.

The penny dropped the day he suffered a huge loss in the stock market. He had no money left to repay his loans. A few months down and he risked losing his car. Certainly that meant his troubles would soon be public information. This completely spoiled his CIBIL score and his name featured in the loan defaulters list.

He promised himself he would never borrow to splurge or speculate.

Priyanka Banerjee (Kolkatta)

Priyanka was net savvy and whatever the need be, her first instinct would always be to check for information on internet. When she needed a personal loan, the first thing she did is to search for it online. She compared the rates and terms of loan from various potential lenders and understood the market a fair bit.

She prepared all her documents before approaching any lender. Most importantly she did all her math on what she needed, how much and how would she repay the same. The day after she was fully prepared, she approached banks in vicinity to apply for a personal loan.

She acted smartly by being forearmed with information and therefore she was able to select a lender that would give her a fair amount of loan at a decent rate. Not to mention she was able to bargain a lower processing fee as well.

Jaswant Singh (MP)

Jaswant knew how difficult it is to get a personal loan with low CIBIL score. Therefore he worked on his CIBIL score since the day he received his first credit card. He decided to maintain a low balance on his cards every month. He would track his unbilled card payments and the moment it would reach about 30% of his card limit, he stopped using the card.

He would sensibly repay all his bills well within the deadlines and be sure he was never late on them. All his meticulous planning reflected well on his CIBIL report. Soon he had a boastful score of 821. He planned to take a car soon. But he did not give in to temptation of buying a sedan when all he could afford was a hatchback.

He chucked the idea of buying a Hyundai Verna and bought a Hyundai i10 automatic, instead.

A Quick Recap

So if you have borrowed money, be sure:

  • To know what you are getting into and prepare yourself in every way to handle the responsibility
  • Calculate your requirement and don't give into temptations
  • Work on your CIBIL score in advance and make sure you use it to your advantage
  • Don’t depend entirely on borrowing. You borrow at a cost and that increases your liability.
  • Before you borrow, shop around for rates and compare lenders.
  • Give savings for the future an equal weightage in your plans

Do this and you will be sorted.