Debt and borrowing are viewed differently by different individuals. While some people may agree that borrowing money for any and all purposes is acceptable, others may strictly oppose borrowing at all. However, there are some life circumstances in which borrowing money is the only option.
Dark side of Personal Loans
It is essential to keep in mind that while some debt is advantageous because it aids in economic growth and helps you save money, the wrong kind of debt can be crippling and adversely affect your financial plans. A loan can sometimes trap you in a debt cycle that can be harmful to your financial health if not used properly.
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Therefore, before taking out a loan, consider whether the cost is justified and whether you can pay it back on time. Lets us look at the dark side of loans from banks:
Cons of personal loans
- Higher Interest rates can be than alternatives
- Fees and penalties can be high
- More eligibility requirements
- Good credit score required
- Additional monthly payment
- Increased debt load
- Higher payments than credit cards
- Lowers credit score if you fail to pay EMI on time
Personal loans are not a good idea for everyone. Below are a few reasons why a personal loan might not be apt:
- You don’t have a purpose for the funds. It can be tempting to take out a loan to have extra funds on hand. However, if you do not have a strategy for how the money will be used, you run the risk of spending money and accruing interest on unnecessary items.
- You tend to spend too much. Using a personal loan to pay off your credit cards may not make sense if you immediately begin accruing new credit card balances.
- You must properly take into account the repayment schedule and monthly payments of a personal loan. Avoid taking a loan if you feel the monthly payments are beyond your means.
- If you don’t need cash urgently you may build up your savings to pay for a big purchase instead of taking out a personal loan and paying interest for many years.
Is It A Good Idea To Borrow Money From Friends And Family?
Borrowing money from friends and family has decreased significantly in recent years. Nonetheless, it remains a popular option when we are unable to obtain a loan due to a poor credit score, previous unpaid loans, or other factors. A loan from a friend or relative, as convenient as it is, comes with its own set of risks. Let us take a look at some of the risks associated with borrowing money from friends:
- When you borrow money from friends and family terms of repayment are vague. Sometimes disputes and arguments may occur because there is no concrete agreement.
- Interest is not usually discussed when borrowing from a friend or family member. Both parties appear to have agreed that interest is either not charged or is charged in an informal amount. As a result, the lender is likely to lose some interest income in this type of loan.
- It’s entirely possible that your friend or relative may experience an unexpected financial crisis soon after lending you money. You may be broke by the time your friend approaches you to ask if you can repay the loan earlier than agreed. In such a situation you may experience feelings of guilt and feel responsible for your friend’s financial difficulties.
- When you meet a friend or relative from whom you have borrowed money, there is a subconscious feeling of indebtedness, and you are very likely to mention at least once that you are working on repaying the loan and that it is on your priority list and this awkwardness may affect your friendship.
Read: Need Money Urgently? 10 Ways to Get Instant Cash for Emergencies
Invest In a Digital Committee Platform And Start Your Savings Journey Today
Alternatives To Personal Loans
Rather than taking out a personal loan and paying high interest we have an alternative option for you to consider.
Money Club: Money Club is an AI based committee platform where you can borrow money and save money safely with thousands of people across the country with the help of an app. It is the best borrow money app.
Committees are an age old method of savings. It is the most convenient traditional way of saving a certain amount of money on monthly basis by a group of people to get a lumpsum amount after a certain time. With technology advancements and digitalization even these age old form of committees have gone online. By digitizing committees Money Club has made savings simple and achievable for everyone and empowered individuals by offering them a safe, secure, reliable and flexible digital solution. When you need money, you just have to bid, and the money is in your bank account in six to eight hours that too at low interest rate. It is the best platform for middle-class families who cannot obtain loans in an emergency and must rely on high-interest money lenders. To know more about how this borrow money app works you can see the video here.
Read: Online Committee System: Simple Way to Raising Debt
Let us understand with the help of an example:
Pratap is a salaried person earning 50,000 per month. He wanted to buy a scooter from a long time but did not save a lumpsum amount. One of his friends told him about the Money Club. He opted for a committee scheme of Rs 60000 for which he had to pool in 3000 per month for 20 months which was comparatively easy for Pratap. After 2 months, that is by just paying Rs 6000 he was eligible to get a lumpsum amount close to 60,000. Pratap bid for the lumpsum amount and won Rs 55,000 and bought a scooter for himself. This was however not possible earlier. Pratap continued to pay the installments till the end of the committee scheme. If Pratap had opted for a loan from bank he would have to pay at least 12% rate of interest but in this case the interest rate was barely 5%. On the other hand, if someone does not bid he earns 12%-15% p.a. interest which is much higher than what banks pay (3%- 6%). Pratap could have borrowed money from his friends and family. But he opted the digital committee way instead. Let us see the benefits of investing in digital committee:
- You earn high returns
- You save for sure
- You get hassle free loans when you really need it
- All transactions are digital.
- You can also earn extra money by referring the best borrow money app
Read: How Saving Money Becomes Easy With The Help of Community?
So, Download the Money Club- the borrow money app and save money and borrow money in times of need without the burden of paying heavy interest.
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