Lending money is a great business, so banks and non-banking institutions can literally break into convincing you that you can indulge in anything you don’t have enough money for. But borrowing on futility is the first step into a debt trap… frederic-robinson.com for more.
Not every loan is in principle bad
Housing loans or loans for things that have the character of long-term investment can certainly be accepted. However, loans for consumer goods, Christmas gifts, entertainment or holidays are bad. So, before you take out a loan for a beautiful new TV or shiny iPhone, consider it well. For example, we don’t have to go far, for example, a recent HANEP survey on Christmas shopping. Almost ten percent of respondents were willing to borrow to buy Christmas presents. Smaller debts of up to 10,000 often cause the biggest problems.
Many households not only borrow when necessary, such as a broken washing machine or fridge, but also use loans to raise their standard of living. A frequent reason for lending is not only home appliances and electronics, but also the purchase of summer holidays.
Learn how to save and read terms Investigation is especially not very popular among younger years. Creating a certain financial pillow for unexpected events is the basis of family or personal finances. If you are unable to save anything from your income, look for savings or additional resources. It is ideal to have a reserve of three monthly earnings on hand.
If you run into a situation where the provision to cover expenses is not enough, consider carefully from whom and under what conditions to borrow money. The offer of loans comes from all sides, but offers are not always fully transparent. As a consumer, you should always know in advance what the amount of repayments will be, how much you will pay, and what sanctions and charges you may have.
Don’t sign anything you don’t understand
For example, such a credit card is a great thing if you understand how it works. On the one hand, it is a handy way to have a financial reserve, but on the other hand, it is important to bear in mind that money (the credit limit) is not yours and is still a loan. Fifty-day and longer interest-free periods are tempting to buy a trip or a new television, but irresponsible purchases are, according to experts, a way into a debt trap.
A situation where the cardholder ends regularly in negative and starts to have problems with repayment is not exceptional. In the worst case, he then breaks the wedge with the wedge, sets up other cards, overdrafts, etc., to pay the debt on existing credit cards, or borrows the debt elsewhere. When there is nowhere else to borrow from, so-called micro-loans with APRs in hundreds of percent come. And the path to the debt trap is complete.
Finally, before borrowing, try depositing an amount equal to the loan repayment on your savings account for a few months. This makes it easy to tell if you will tighten the loan.