We all go through tight moments of our lives in one way or another, but the financially tight times can be one of the most crippling. Debts are some of the most remarkable taints we see in our personal finance records, and getting rid of them can be quite liberating. However, paying off debts does not happen overnight especially if you are a low-to-mid income earner living in a tough economy.
Reasons Why You Go into Debt
But debts and loans are sometimes inevitable, even called-for. Perhaps you wanted college education and you had to take student loans to be able to get a degree. You wanted a roof over your head and your family, so you take out housing loans. You may also need a vehicle to drive yourself to work, so you have to get auto financing.
In these scenarios, debts become an integral, almost normal part of life. You go into debt out of necessity to have the tools (education, shelter, transportation etc.) to survive. But since many of us are unable to get a new home, a car or good education with cold cash in hand, most these loans were made more affordable and flexible to help average Americans get them.
When Loans Aren’t Necessary
Unfortunately, many people take out loans even when it is not necessary. Keeping up with the Joneses and aiming to have everything new and updated even when it’s beyond your means are not practical and do not make financial sense.
When you take out loans that aren’t necessary, you compound more to your growing list of debts and you fall into the burden of paying so much money that would have otherwise went to paying off “loans that were necessary” and savings for the rainy day.
The Aftermath of Your Loans
It’s worth bearing though that those were loans, not gifts, so you will need to pay them one way or the other. The bad thing is, these loans become more expensive with interests, and the more you neglect them, the more “indebted” you are to them.
Paying off loans can make quite a dent in your budget, but this is a reality that you will have to face. Even the small and short-term loans you got in past emergencies, like the cash loans for the car repairs, accrue interests. But since you took those loans out of necessity, you will need to allocate a budget for them so you are on top of paying them off.
Whether your loans are long-term ones (like your home mortgage) or just small cash loans that you got online, always be reminded that these loans are meant to be paid. It may be better to start harnessing your personal finance habits now so you can take better control of your money. Perhaps you can save a hefty amount for the down payment of your new home or new car and consider a large portion of your tax refund to student loans.
These loans will not go away unless you pay them and they get bigger by the day you neglect to hand in the payment. Worse, you can get bad credit score if you are delinquent. The consequences of your loans can burden you for the long term, so think many times whether or not a loan is necessary and do everything in your power to pay it off efficiently.