{"id":5722,"date":"2024-03-29T10:35:15","date_gmt":"2024-03-29T10:35:15","guid":{"rendered":"http:\/\/s9financialplanners.com\/blog\/?p=5722"},"modified":"2024-12-10T08:08:20","modified_gmt":"2024-12-10T08:08:20","slug":"loan-serves-you-enslave","status":"publish","type":"post","link":"https:\/\/s9financialplanners.com\/blog\/loan-serves-you-enslave\/","title":{"rendered":"Does your loan serve you or enslave you?"},"content":{"rendered":"

I read a quote that says, \u201cSurvival mode is supposed to be a phase that helps save your life. It is not meant to be how you live.\u201d<\/em> That’s how I ended up writing this blog.<\/span><\/p>\n

The constant stressors of today’s life, such as work pressure, social expectations, and most importantly financial worries, can exacerbate survival instincts and contribute to damaged personal finances. I know I am still not clearly articulating, let me just get to the point. I am talking about Loans which are also called debts.<\/span><\/p>\n

From a needle to a piece of land, we now live in a world where things are available to us in a few clicks. No doubt desire is what makes us human. Desire is a cause of multiple things like internal wishes, personal dreams, societal pressures<\/a>, and lastly the most important comparison. Comparison is the most common thing that drives the desire of a human. We live in a society where things are compared with what you possess (for eg: a home), with what you show (for eg: a high-end car), and so on. I strongly feel that\u2019s where the line between survival instinct and ego blurs.\u00a0<\/span><\/p>\n

Marketers often use instant gratification to get their products or services sold. I would like to add by saying instant gratification is there to satisfy our ego due to comparison & some obvious social factors.\u00a0<\/span><\/p>\n

When I say things are easily available in a few clicks I mean we tend to buy things considering the so-called \u201ceasy loan\u201d or \u201ceasy EMI\u201d options. We mostly think of availing things right now, we hardly think about the long-term implications or damages on our personal finances.\u00a0<\/span><\/p>\n

The above discussion was to enlighten us about the behavioral and the survival part of us that decides whether a loan will serve us or enslave us. I want us to also look at the informational part of it. What kinds of loans are available, the difference between asset and liability, Understanding the Tenure of a loan and its interest rate, and so on. This will be a long read but surely an interesting one.<\/span><\/p>\n

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Do you own Assets or Liabilities?<\/b><\/h2>\n

From a financial planner’s perspective, we first need to understand why we are taking out a loan. Is that an asset or liability? For example, if we buy an expensive luxury car, but the car is only used for personal use and there is no profit on that possession then it\u2019s a liability. If you opt for a vehicle loan, you are taking a loan for a liability not serving any additional value. Also, car value depreciates from 10-20% every year. I don\u2019t mean you don\u2019t need a car, but it\u2019s important to define why we need that.\u00a0<\/span><\/p>\n

If the same car is used to generate some direct or indirect income then you are taking a loan to generate assets out of it.\u00a0<\/span><\/p>\n

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Type of loan<\/b><\/h2>\n

Loans can be in any form like credit card, personal loan, bank loan, EMI, and so on. Here we need to have a balance of everything in regard to the tenure of the loan and the interest we are paying. Every new loan taken needs to consider the overall ability to pay it back in the current time and the future.\u00a0<\/span><\/p>\n

Tenure plays an important role because the more the tenure of the loan, it increases the more interest when we pay back. For eg, if we take a loan for \u20b9100000 at 6% interest for 10 years, we pay back \u20b9133225 and if we take \u20b9100000 at a 6% interest rate for 20 years, we pay back \u20b9171943. Hence ensure that you keep the down payment high and tenure low.<\/span><\/p>\n

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Loan on Investment Vs Personal Loan<\/b><\/h1>\n

Loan Against Securities (LAS):<\/strong><\/p>\n