Should Personal Debts Be Restricted?

Most of us have borrowed money for some reason or the other. There’s nothing wrong with debts as such because it helps in economic growth. You take a loan, invest it wisely, get returns and then repay the loan. There’s no healthier system than that. But when your loan goes beyond your repayment capacity, real problems crop up, for you. Surprisingly, many of us don’t see the logic that we shouldn’t borrow more than what we can repay or our calculations go wrong! This is the reason that its felt by financial experts that the loan sanctioned should be restricted or based on a number of categories like your salary, your savings, your credit history and other loans etc.

These days with credit cards and store cards in abundance, taking debt has become so easy that it has become an indulgence. Store keepers always lure you with their offer to open monthly account for your household groceries. You take things throughout the month without having to pay every time you buy something. You feel so good for the moment. But you can hardly keep a track of your expenditure. At the end of the month, you’ve had it! I always buy things on ready payment so that I know what I’m spending and also am not in debt. Attractive “0” percent interest monthly EMI’s are other traps that easily get you into big debts.

Limitless debt is not a personal issue anymore; it has impact on the market in general. Today though the prices of houses have gone down by 20 % why are first time buyers still finding it too difficult to buy them? This is because the lenders have made taking loans an easy affair for the young crowd which has made the property owners hike the prices to impractical levels, which makes it difficult for the first time buyers to purchase them. These first time buyers are suffering because others have great debts.

Did you know the most of the college dropout cases last year occurred due to huge student credit card debts? Students were given loans without any limits and later they had to suffer because of mismanagement of the loans and excessive debiting. Naturally they are young and its quite possible for them to be money-wise inefficient. Of course now, a lot of financial literacy programs to educate students on how to protect themselves from debts are being made.

Most lenders show you the ways to take loans and ask you about your plans of repaying it. All they are concerned about is the number of months you are going to take to repay the amount and if you are willing to pay their interest. If you fault at any stage, they’ll catch you then. But it would’ve been better if they could have asked you how you’d pay them in case of any financial hardship from your end. Banks and credit card companies go by this principle. But mortgage lenders are different. The first thing they do is mortgage a property of yours in lieu of the money they lend you. This can be applied to other situations of loaning also. By basing the amount you can loan to your salary or savings a lot of disproportionate loaning can be avoided.