The 1980’s generation and the generations before that had a strong belief in savings. If they earned $200 per month, they would splurge only 60% of it and the remaining 40% would go into some of the other kind of savings; be it in the form of Fixed Deposits or post office savings, or simple savings account. This financial system based on a pro-savings background had a few drawbacks like the inability to live a lavish lifestyle or inability to buy certain desirable goods or properties, etc. But the huge plus point of this system was that in any given financial circumstances, people would always have a safety net to fall in, in the form of these accumulated savings.
The Millennial Generation with an Exactly Opposite Approach – Inducing More Borrowings
The current generation aka the millennial generation, unlike the preceding generations, believes in the system of spending what they earn, or probably even more than that at times. Thus, their system is based on taking and repaying debts as and when required. However, this system of the millennials is successful and feasible only if the money is borrowed after doing sufficient planning and analysis. For that, you always have the option of searching around online for the best money lending websites. Out of the many options available, https://www.libertylending.com/ is one of the safest money lending websites you can find over the internet.
What are the Dos and the Don’ts You Need to Know Before Borrowing Money?
• Dos:
1. Find, Compare, and Select: First you need to ensure that you don’t just settle for the first lending website you find online. You must find a Number of different options available in the lending market first. Then you must list out all of your credit requirements like the rate of interest, monthly payment requirements, incentives available for advance repayment, etc. Then you must compare all of the options you found on the basis of the above factors. And only after this comparison, you must select the ideal lending company.
2. Always Take “Good Debt”: The purpose for which you are taking the debt is also extremely crucial. A debt is called as good debt if it is taken to be used for an appreciating or growing investment. Examples of good debt can be the debt taken to buy a house or property in a commercial area which is an economically growing area. Another example can be an education loan taken to study abroad wherein the return in the form of foreign earnings shall be greater than the loan or debt itself. The reason why you should take such kind of debt is that it will be benefitting for you only in the future.
3. Assess Income, Debt and Make a Budget accordingly: The most important factor to consider before borrowing money is your repayment capacity. Repayment capacity is largely dependent upon how good is your financial planning to provide for the excess amount required per month to systematically repay the debt. This can be done if you assess your income first, and then accordingly borrow a safe repayable amount. All this, in a nutshell, means borrowing only what you can repay and then preparing a budget for the repayment of your debt.
4. Seeking Professional help: As mentioned above you must make a budget for debt repayment, but in case it’s not possible for you to do it all by yourself, you can seek the help of professional credit counselors. They can do this job for you and ensure you don’t run out of money.
5. Balance Between Expenditure and Savings: Mere planning of a budget for repayment of debts is not enough. You must also take practical steps to execute it. The most important step would be to maintain a balance in your monthly expenditure and savings.
• Don’ts:
1. Don’t take too much personal debt: Personal Debt or Consumer debt involves a debt not taken for an appreciating investment purpose, i.e., taken only for personal finance purposes. This includes debt for mindless splurging, lavish lifestyle, buying unnecessary articles, etc. This will in turn only affect your future financial position because you won’t have enough financial backing to repay this consumer debt.
2. Don’t Just Focus on the Rate of Interest: During the analysis of different lending companies, you must ensure that you don’t just focus on the rate of interest aspect. You must also consider other significant factors such as the monthly installment policy, the company’s industry goodwill and reliability, penalty on delayed payments or defaults, etc.
3. Don’t Default or Delay too much in Repayment: Delay in repayment or default means that you are taking a whole lot of risks willingly. Risk number one is the negative impact on your credit score. A credit score is given to you by credit rating agencies on the basis of timeliness of your payments and also on the basis of amounts repaid. If you have repaid the appropriate amount due on or before the due dates, you get a good credit score, otherwise a bad one.
The second risk is the additional rate of interest charged over and above the regular rate, on account of delay. This will just make the whole debt borrowing concept senseless. The third risk is the risk of paying a heavy penalty amount on account of defaulting payment.
Conclusion
The modern era is inclined towards spending more than saving. This has increased the growth rate of debt taken by the millennials. But taking debt is safe and rational only if it is well planned after an in-depth analysis of several important factors. For this, you need to have a look at the do’s and don’ts while borrowing money. Apart from the obvious ones, there are some crucial do’s that borrowers often tend to forget like comparing several market lenders in terms of interest rates, installments, etc., assessing repayment capacity and then preparing a debt repayment budget, taking debt to make appreciating investment, etc. While some important don’ts include avoiding personal debts, not making delayed payment or default in payments, etc.
