Sandeep Vij, who lives in a quiet colony in Panchkula, faced financial difficulties this year as his income was reduced due to the lockdown, but his commitment to the payment of the loan remained unimpressed. 52-year-old Sandeep is a first-generation entrepreneur. The lockdown stalled both his businesses of the dry cleaning unit and the courier agency, allowing him to spend more time with his family. But the burden of debt and the salary of employees put them in financial trouble. He now wants to settle his debts so that he will never have to go through such a situation again.
Take credit wisely: Ideally, all of us want that we have enough money to meet the needs. But in reality, we often have to take loans to meet our financial goals. Earlier, taking loans was seen as a social evil. But a lot has changed now. Today, loans are available from holidays to holidays to buying houses. The EMI culture has blurred the line between product cost and service. Many types of debt: There is nothing wrong with taking a loan as long as you realize its possible consequences. There are generally two types of loans, one related to property creation and the other related to property degradation. When you take a loan for buying a house or for education, it is a debt related to building a property, while when you take a loan to take a new phone or spend a holiday, it is a loan related to property degradation.
When you buy a house worth thirty lakh rupees for your living, then in this way you are also constructing the property for yourself, which is likely to increase in value in the future. This also saves rent. Similarly, when you take an education loan, you are improving your chances of employment. In lieu of both these types of loans, you can also claim tax exemption, which reduces the cost of debt. Conversely, when you buy a car out of debt, it starts depreciating as soon as the car exits the showroom. Whereas you have to pay the loan based on the cost of the car. The same applies to purchasing mobile phones, electronic goods on loan or spending holidays, or taking personal loans for any other need. This does not mean that all debts related to property degradation are bad. If a car bought on loan helps in employment and increases your income, then it is not wrong.
Lessons for borrowers: Sandeep Vij should make a list of all the loans he has defaulted on and including EMI and interest payments to know which are the loans with higher interest rates. If you are having difficulty in paying EMI, then you should talk to the lender bank about the business-related loan. Banks and lending agencies are willing to restructure the loan.
Some tips regarding debt -
(1) Take a loan only when there is no other option.
(2) The total EMI of all your loans should not exceed forty percent of your monthly income.
(3) Pay EMI on time.
(4) Create an emergency fund so that EMI of three-four months can be repaid in the future.
(5) Do not commit to repaying high-cost debt like credit card or personal loan.
(6) Try to ensure that the loan is for a limited period, housing loan should not be for more than 15 years.