The easiest thing a salaried individual can get is a loan. Whether or not they genuinely need the money, banks are always ready to offer attractive loans. The subprime crisis in USA is a classic example of how banks blindly lent to borrowers. While borrowers felt great initially, their debt burden began weighing heavily on them. Financial anxiety became common and it seemed like there was no way out. How can you navigate your way out of this trap?
While taking up a loan most of us take comfort in our ability to make EMI payments. We fail to understand that a more affordable EMI only means a longer loan where we wind up paying more interest. Very few people even have a plan to will close their loans before the actual term by repaying the principal regularly. We assume a static or linear course in our money matters. But financial planning shows us that reality could be vastly different. As we progress in our life our requirements and foundations may change. We expect income to grow consistently but never a factor in a dull year. In such a scenario, would it still be easy to handle a financial emergency, provide for expenses, manage loans, and continue saving?
Anxiety will start creeping into our life as financial commitments keep piling up. We keep servicing the loan for a longer period. A loan in itself need not be the source of financial anxiety. However, it can be overwhelming to keep up lifestyle expenses, service loans, address sudden expenses, and save. Often, we compromise on saving because we still have time. But the stress of not saving will eventually catch up.
So how one can avoid the sinking feeling that financial anxiety gives you? Debt Management and Financial Planning are key. Every person should check their financial health before making any big financial decision. Consulting a financial planner can provide clarity on their capacity to service a loan and its impact on their finances. A financial planner would be able to help identify priorities and chart a course of action to achieve them.
By consulting a financial planner, you can avoid getting the sinking feeling because of your loans.