Debt – Is it good or bad ?
Living without debt is a Salvation, but not everyone has a life be Debt Free. Most of us were fell in the trap of debt, because of misunderstood about Debt. Many people get into debt and drown their wonderful lives. Some people tied up a life time loans and sigh about why we borrowed it. Very few people use the debt carefully or live without Debt. We are all just borrowing and leaving at some point in our Financial Life.
Types of Different loans,
- Personal Loan
- Vehicle Loan
- Home Loan
- Education Loan
- Jewel Loan
- Business Loan
- Credit Cards
- Mortgage Loan
- Exposure on Derivatives
Individual Loans can sometimes cost lives that lead to Bankruptcy. Human Suicides due to high debt, are also frequently happening. When we need a home, we just get a Home loans from a bank or any Financial Institutions. More than half of our income is occupied by these loans – Called Life Time Debt. Debt usually operates between our Needs and Options. Nowadays, Personal Loan and Consumer Loans through EMI have become easier for anyone. This is the place where most of them spending their earned income.
Zero Interest or No Cost EMI:
When buying a Home Appliances or Luxury items of our choice, we do not plan to Save money earlier. Instead we just choose Equated monthly installments (EMI). This is absolutely true on buying Gold Ornaments or Jewels. For many of the people, the thought is i am buying the products on Interest free installments, then why i have to worry ? We presumed that there is no extra cost for buying on these items. Is it really true ?
Can any financial institution or Business offers you Interest free loans ? Then, what about their Sales or Earnings ? If we look at the Loan terms and conditions – It’s really matters. If there is any Zero Interest EMI, then there is a transaction fees, higher prices on Products. No one will give you free stuff.
Is the Debt, good or Bad ?
We can borrow money for our needs, but keep pushing the options away. You don’t need to rush to buy everything. You don’t need to buy a high cost Tech Gadgets, until you really need it. When we are planning to buy a home, we can save or invest as much as possible and then buy a home with that invested amount. Even the invested amount may not fulfill your Home needs, but it just help to take a loan as little.
If you are planning to buy a second home, think about Cash Flow. Can you generate better returns from your second home than paying monthly EMI ? Beware, Home Property is a liability if you cannot generate cash from it. Suppose, you have a Cash of Rs. 50 Lakhs and looking to buy a small home. Instead of buying a home with the amount of 50 Lakh rupees, you can deposit in a bank or any business and it may earn a little more than Rental Income. If you are really knows that your Home will fetch you good returns that Deposits or Business, then go ahead.
It is not advisable to borrow and Invest. Everything is accounted for Income and Debt Column.
Get a Debt Free Life:
- Before buying a home loan, try to save a little amount for the Down payment. Utilize the Mortgage loan whenever needs. Do not borrow anything in a hurry. Buy only if really needs for you.
- Use Recurring Deposits, Bank Savings, Liquid funds for the short term needs.
- Use Public Transport and Taxi instead of buying a costlier Car through EMI. Luxurious car is not your honor.
- Avoid Credit card loans or payments as much as possible. Don’t forget about the Penalty and Interest fees on Credit Cards.
- Retirement Planning is more important than your Child’s Education buying on Loans.
- Plan a trip and use it to save a part of your income – Then enjoy your Travel life.
- Always ready for the Emergency Funds.
- Even if you don’t have a loan or debt, Plan for the required Insurance for your life and health – It’s just protects your wealth in a long term.
- Look at for an Opportunity to generate Cash flow, before buying any loan.
Check your Debt to Income ratio always,
D/I = Total Debt / Total Income or Asset
Take care of your Debt healthily, so it will protect you from Debt !
Kindly share your views / comments with a smile 🙂