Ok first the confessions. I am born in the 1960s and going by Google’s statistics old enough to be the parent of my average reader. So if I sound like a stuck record (ha a relic of the 1970s and 1980s – the Gramaphone record player!!) so be it.
I am anti borrowing – and believe that borrowing means living beyond one’s means, but love people who borrow. This is simply because these borrowers are the ones who have seen my Hdfc bank and Hdfc Ltd shares go through the roof. And repeat. Again.
So welcome to a post where I am going to tell you why borrowing makes no sense for YOU:
1. You pay interest: It is always better to RECEIVE interest instead of PAYING interest. Simple better a lender be, and not a borrower.
2. Opting for Consumer or bank credit for your purchase is MOSTLY a case of lack of self control. So learning to delay your gratification is a nice lesson to learn. Save / Invest in a SIP and when the amount accumulates to the level you need go and buy the product.
3. Interest rates on consumer credit, credit cards, and even bank loans is very, very high. It is almost impossible to earn about 30% p.a. on your investments – but you pay interest rates in that region if you borrow for your unplanned expenses.
4. Clearly you are shooting your budget or worse – you do not even have a budget. Get things organised, get a good budget FIRST.
5. Credit card interest rates hurt very badly when you are not able to pay off in full. Every additional purchase is charged FROM the date of purchase (no not from the due date)…and this is unknown to most people and it cuts viciously.
6. A poor credit score can hurt your job prospects, cost of your future borrowing – car, house, etc., reduce your chances of getting good houses on rent, etc. So if you borrow and do not repay on time , chances are you will NOT get loans or get them at more expensive rates!
7. Maybe a little far fetched but bad financial habits will impact your close personal relationships. Your parents, siblings, girl friend, spouse – all of them could have been at the receiving end at some time!
8. It can be addictive and chances are you realize that you are used to a level of ‘addictive spending’ and you feel entitled to that standard of living!
9. In a worst case, it can lead to bankruptcy: well not so fast, but you never know, right? vaat lagi…
10. Buying a product can give you some kinda orgasmic delight, but remember it may not last too long! So NOT borrowing can give you peace of mind. So go and get peace of mind instead of consumer debt…..
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