Living in debt or five myths about loans

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People say not to take cunningly, to give cunningly. Indeed, any debt requires repayment, this must be taken into account.

Old school people don’t like to live with debt. They are so psychologically uncomfortable, although everyone at least once in their life has occupied one way or another. Such people try to bypass bank loans, and they also do not like to borrow from their neighbors.

The current generation has a different attitude to loans, considering it a convenient financial tool that improves life. And this is so: with a competent attitude, credit money improves the quality of life and does not threaten the debtor with sleepless nights.

Loans and credit cards help you solve financial problems without turning to relatives or friends. Borrowing from a bank is the norm. You will not be understood if you ask to borrow money before payday when there are credit cards or installment cards.

Universal card “Halva” is not just a convenient means of payment. It is like a Swiss knife containing dozens of useful financial instruments in one plastic and mobile application. The only difference is that a branded knife will cost you a tidy sum, and Halva’s service is free. Make your life sweeter and more convenient!

Myth 1 – it is better to borrow from a neighbor

Borrowing from a neighbor to paycheck is a common practice for many. So, for example, many lived in Soviet times. It’s good that there were neighbors who could borrow.

But not everyone has this opportunity. In addition, not everyone likes to borrow: you give with your hands, and return with your feet. This lending model has increased risks for those who lend.

Not everyone returns money on time. Often you borrow a large amount, and return you in small payments for a long time. Not everyone saves these payments. For many, such receipts are spent on something household. As a result, there is no deferred money even after the return of the debt.

An equally rare problem is that the debtor spends money and forgets about it. Not always a reminder helps to solve the problem. If a receipt was not issued, then the problem cannot be solved through the court.

Natalya somehow borrowed money from a friend to pay for an apartment. When a friend came for money, she asked to borrow more than agreed. As a result, Natalia was returned the amount that was originally discussed. The friend did not remember that in fact she was doing more. Natalia did not quarrel and prove her case.

If you recall the Soviet era, then in addition to neighbors, you could borrow money at the mutual aid fund. Such cash desks were organized at work. Participation required membership dues. But the money was borrowed interest-free.

Today, banks play the role of neighbors and mutual aid funds. This is convenient, since financial institutions always have money, and you can borrow a very large amount. For example, for an apartment. For such a service, banks charge a fee in the form of interest, but this does not interfere with the popularity of loans.

Let’s compare loans from neighbors and from a bank.

Borrow from a neighbor Get a bank loan
Not every neighbor has extra money Getting a loan is easy
It is difficult to borrow a large amount The loan amount varies. Mortgage loan allows you to buy an apartment
You don’t pay interest You pay interest
You can forget, and some debt will be “forgiven” Forgetfulness turns into a fine and penalties
In case of non-payment, you spoil personal relationships Personal relations with no one spoil, all problems are solved according to the contract
If money is given, then without employment documents It is difficult to get without official income

 

Myth 2 – you need to save, not borrow

Another common opinion is that you need to live within your means, if your money is not enough, then you should refuse to buy.

There is a rational grain in such a position. Don’t take on loans that you can’t repay. But if you have a stable income, then buying on credit can be beneficial. Sometimes such a step is more rational than accumulating the required amount.

  1. Not everything can be saved. For example, few people can save up for an apartment. And if it does, it will take years. The housing issue usually requires an urgent solution.
  2. You can’t take money out of the business. Often, entrepreneurs prefer to pay interest on a loan than withdraw money from circulation.
  3. You can beat inflation. If you save money for a purchase, then you should take into account the fact that inflation reduces the value of savings and moves away from buying.
  4. You can buy cheaper. Credit allows you to buy now without waiting for price increases. And prices, as life shows, are always growing.

Myth 3 – it is profitable to take loans in a crisis

Often in a crisis, people take consumer loans to buy equipment or repair an apartment. Realizing that these expenses will increase in the future, many are trying to jump into the last car, that is, to borrow money and sell everything in stores. Is it worth it to do so?

Experts do not advise taking loans during a crisis. At this time, the risk of a decrease in income or loss of a job increases, that is, the chance of having difficulties with payments increases. But no one will forgive the debt, it will have to be paid off in any conditions.

In addition, during a crisis, interest rates on loans usually rise. Such debts are more expensive. Therefore, lending should be deliberate, and not succumb to panic.

If you need to take a loan right now, without waiting for better times, then soberly assess your capabilities. Remember, a loan is a tool for those who have income or will receive it in the near future. With proper financial planning, it brings benefits to the borrower. But he is not a lifesaver in a situation where there is no money and is not expected.

Assessment of your capabilities

Credit is a financial instrument that improves life. But it must be used wisely. This means that you need to soberly assess your capabilities and not take more than you can repay.

There are a number of rules for such an assessment.

  1. Choose the right monthly payment. It should not exceed 35% of your income, otherwise the loan will be unsustainable.
  2. Evaluate the conditions of loans in different banks. Compare not only the interest rate, but also other conditions. For example, the amount insured , penalties and conditions for early repayment.
  3. Assess the need for a loan. It is necessary to take out a loan if necessary or if such a decision is profitable. Of course, it is possible to play in a casino or relax in the Maldives on credit, but it is not advisable.
  4. Choose a long-term loan, do not regret overpaid interest. It is better not to subscribe to unbearable payments; if you have free money, the loan can be repaid ahead of schedule.

You can calculate a comfortable loan amount using a loan calculator.

Myth 4 – you can take an interest-free loan without thinking

Doing something without thinking is not a good idea. Borrowing money like that is a doubly bad idea.

First, “interest-free” loans are often a promotion. For example, this is how equipment or sports subscriptions are often sold.

But shops or fitness centers themselves do not issue loans. Only banks have the right to lend. By purchasing a product or service in this way, you enter into a loan agreement with the bank, which should be carefully read. It happens that such an advertising slogan means a loan with a down payment of 0%, and from a certain month an interest rate appears, for example, 10% or 15%. As a result, the loan is not interest-free.

Secondly, you can buy goods on credit without overpaying interest. But this service is called installment. It is more profitable than a loan, but the money will still have to be returned. An installment plan, like a loan, requires an assessment of financial capabilities before it is issued.

If you buy an antique sideboard for 700,000 rubles in installments for 10 months, receiving only 70,000 rubles a month, then you should think about the fact that even without interest this is an unthinkable adventure. And if your income is 600,000 rubles a month, then such an offer already looks profitable.

Myth 5 – it’s not scary to be a guarantor

Sometimes a guarantor is required to obtain a loan. Usually this person becomes a spouse, spouse or relative. Sometimes they ask for a friend.

It is not scary to act as a guarantor in front of the bank. This is not a stunt trick, but a deliberate decision of a capable person, saying that in case of non-payment of the debt by the borrower, the guarantor will pay the bank.

Talk about the fact that this is a “simple formality” is just talk. There is no truth behind them. Life can turn in such a way that you have to return the money that you did not even spend. Therefore, consent to become a guarantor must be given deliberately, understanding the possible consequences.

Credit is not a direct path to debt. However, before you borrow, evaluate what is the minimum amount you need per month to live. For a normal life, not a starving existence. Add money for unplanned expenses that usually appear at the most inopportune moment. After that, you will be able to understand what kind of loan and with what payments you are comfortable.

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