People across all age groups, from all walks of life, all professions, and all backgrounds, most often than not find themselves in a precarious financial situation that instigates them to take on debt. Debt can be in the form of a home loan, student loan, personal loan, auto loan and credit card debt. Taking on debt isn’t a bad idea, but what’s unsettling is how people have accommodated it in their lives as something very normal. This is scary because debt is rising at an alarming level and it can spell disaster if it is not managed responsibly. Let’s delve into the mindset of the people borrowing money and incurring debt.
The mindset of people borrowing money falls into these 3 basic categories of borrowing.
- Intelligent borrowing: The class of people indulging in intelligent borrowing are the types that use the borrowed money to invest in something that can bring high returns. For e.g. a home loan is taken to invest in a property that can earn high returns due to its appreciating value. Also, a student loan can be looked upon as an investment towards upgrading the skills that will eventually give you profits in the long run.
- Forced borrowing: This is a sorry state of affairs. Emergency situations occur, which are beyond your control. Medical emergency falls in this category.
- Reckless borrowing: This is the most dangerous type of borrowing. The purpose of reckless borrowing is to show off, invest in buying assets that depreciate, spend on status statements, etc.
Why Debt Prevails to an Extent That It Has Now Become the New Normal
Here are the top 5 reasons why people take up debt and why we have let debt become the new normal in our life.
People have different reasons and situations which compel them to take on debt. Let’s explore some reasons why debt prevails.
- We tend to overspend.Most of us do not set up a monthly budget or if we do, we conveniently fail to adhere to it. The consequence is overspending, which can go out of control and land us in a financial trouble. If the expenditure increases but income remain stagnant, then over time it becomes difficult to make ends meet. We then turn to credit for help.
- We are victims of inflation.Inflation has hit us big time. The cost of all essential commodities has gone up. The price of petrol, gas, food, housing, electricity and everything we need to live a normal life has gone up, but the income hasn’t. Therefore, it has become increasingly difficult for people closest to the breadline to adapt to this inflation. They, then turn to credit for support.
- We need to deal with life’s uncertainties.Life’s uncertainties can hit us anytime. If we are not prepared, they can cause quite a turmoil in our lives. A medical emergency is one of them. It’s hard to fight the cost of an emergency medical procedure. If we have nothing to cover our financial need during this emergency, we turn to credit for help.
- We have business needs.Running a business, whether big or small, requires constant funds. Whether it is about expanding a business or meeting the day to day ancillary costs, we turn to credit to fulfil these commitments.
- We have dreams to fulfil.We just live once. So, we want to go on vacation, buy a bike, or have a dream wedding. And we don’t have the financial ability to fulfil any of these, but we just have one life to live our dreams. So, what do we do? We turn to credit.
6 Tips That Can Help You Keep Your Debt in Check
- Limit your spending; Stick to a monthly budget.
- Keep a personal credit line ready for emergency situations. Applying for MoneyTap’s personal line of credit will ensure that you are ready for all sorts of financial emergencies.
- If you cannot cut down on your expenses, find out ways to increase your monthly income.
- Don’t use a personal loan for the wrong reasons. Using the borrowed funds for investing in stocks, vacationing, gambling, etc., is a big no-no.
- If you find yourself unable to keep up your repayment commitments, ask your bank for a lower interest rate.
- If you are finding it difficult to make multiple monthly payments towards your multiple debts, consider taking a debt consolidation loan. MoneyTap Personal Loan 2.0 with an interest rate of 1.08% per month is an ideal financial product if you are thinking of consolidating your debt.
It’s now normal to have debt. However, you need to know of ways to tackle your debt smartly so that it’s easier for you to take control of it. The better you face your debt, the better you accommodate it in your normal life.
You can choose to be on top of things by consolidating your debts and keeping a line of credit ready for an emergency. MoneyTap can help. Download the app today.