Learning from Irresponsible Lending, Spending and Borrowing

August 30, 2013 by  
Filed under Debt & Credit Free

People are looking at all sectors and areas of society to blame for the financial crisis that has caught the world by storm. But while they are looking elsewhere, they forget to see themselves for their Irresponsible Lending, Spending and Borrowing. True enough, all persons can be faulted for this irresponsibility at one point in their lives. Others have however made it a regular part of their life.

Not all people have the luxury of having money within arms reach all the time. While some people work hard every day of their lives making both ends meet, others struggle to avail of almost all loans available in the market. In most cases, the latter mismanage and find themselves not knowing how to repay such loans resulting to bad credit later on.

Ask around and you will realize that while some people blame the government for financial crisis, others look at most people’s Irresponsible Lending, Spending and Borrowing for being caught in such situation. Simple logic will tell you that if you do not have enough money to pay something in cash right now, then you are better off not buying it on credit because you simply could not afford it.

Irresponsible Lending

Some people blame the US economic crisis on the lending blitz conducted by banks and mortgage lenders. To improve their statistics, banks lent money to borrowers with bad credit exposing them to the risk of defaulting on their mortgages. The increase in non-payment of mortgages led to bank losses and then ultimately to the mortgage crisis which threatened the US economy.

Research shows that lenders issued credit cards to people who obviously did not have the capacity to pay. Up to 88% of borrowers who were issued with credit cards were not even required to provide details of their paying capability. This is obviously tantamount to irresponsibility on the part of the lenders.

Lending irresponsibility can take many forms including the following:

  • Giving bad advice to a borrower
  • Bad handling of arrears
  • Pressure selling
  • Lending without considering ability to pay
  • Increase in credit card limit without borrower’s permission

Irresponsible Spending

If there are lenders who are irresponsible in providing mortgages, credit cards and cash to people who are not capable of paying them, there are also people who spend irresponsibly. Spending irresponsibly means spending cash or in credit even if you are well aware that you could not afford such spending due to limited budget, existing credit or some other reasons.

Irresponsible Borrowing

The financial crisis being experienced by individuals all over the world is a result of Irresponsible Lending, Spending and Borrowing. Why blame the lenders for lending irresponsibility when the borrowers themselves should have been responsible enough to know that they are better off without such debts? It takes two to tango and in this case, the world can blame both the irresponsible lender and borrower for their misfortune.

Lenders will always find a way to increase their loan portfolio so the responsibility basically rests on the borrowers. No lender can force you to take on a loan without your consent and active participation.  Borrowers should take on a more proactive role in becoming responsible borrowers if they do not want to be caught in a pile of debt they are not able to pay.


How Times And Views Have Changed

August 1, 2013 by  
Filed under Debt & Credit Free

There was a time when to talk of having debts was like admitting that you liked to pull the wings off flies. People simply would not admit to having debt. Even if they did have debts, and even if a quite considerable one, they would hold this fact as a closely guarded secret, however now days this is really not seem to be the case. It now appears that debt is seen as an accepted peril and a fact of life by most folks. There have been some good outcomes to this however; with many responsible people especially those with lower incomes, are able to spread the cost of necessary expenditures over a manageable period of time. This can occur when the debt is managed carefully and in a responsible manner.

People need to become educated or instructed professionally to be able to differentiate between different types of debt. Instead of assuming that all debt is bad, we need to be able to understand the difference between manageable verses unmanageable debt and unnecessary and necessary debt. Then it would much easier to discern when going into debt is an acceptable step and if it is the most viable option on the table This alone would help to stop many individuals from getting into damaging and excessive obligations which could bring severe blight to one’s life and lifestyle.

It would not be true to say that our present-day predominant view on debt is the absolutely correct one. Nor would it be accurate to assume that the old-fashioned attitude was strictly fair or correct. What we can hopefully all agree on is that debt awareness is more important than anything, and education is the best tool to pave a path to a greater and more sensible approach to understanding your debt obligations.

How Debt Can Ruin Your Life

August 1, 2013 by  
Filed under Debt & Credit Free

In most financial institutions, the process of acquiring a loan does not take place in one day. The desire to apply for a loan also sneaks into peoples lives without knocking. It grows slowly and overtakes us whenever we get overwhelmed to contract ourselves with the financial institution. The end result finds us in mountains of debts that are stressful to handle.

 There are several reasons why people approach financial institutions for a loan. Some of the reasons can arise from unanticipated emergencies that are likely to leave you with long –term and huge financial burdens. Some of the emergencies could include medical fee, school fees for your children as well as other personal issues that arise from day to day.

 Even though emergencies can force you into acquiring a loan, they are not the only reasons why people take loans. At times, people have the desire to buy some of the products they have admired for a long period of time. Instead of saving up until the buying time is ripe, most people opt to use their good credit score to get loans using their credit cards or other forms of credit. In most cases, people visualize it easier to take a loan, buy the product they want and pay for the loan later.

 Public thinking has it that credit card purchases are not harmful in any manner. However, before you start misusing it, you should understand that small purchases are the main reason why your friends are stuck into serious debt problems.

 Debts train you to lead a very peculiar life that requires you to spend more than you can actually afford. With time, you will get used to this kind of lifestyle and will be full of debts that you can not handle with your monthly pay. You will actually feel a false sense of being wealthy in order to keep up with the competition among your friends and family members but the end result would be too painful.

 Relying on debts blindfolds you from accumulating your own wealth and instead accumulates that of your lender. The huge interests you pay on your lender could easily benefit you in building up your wealth. In addition, incurring debts is a bad financial decision that has a negative impact on your future. Your family will defiantly find it rough surviving on the limited income especially if you are still paying for your debts.

 They also affect your future financial plans. You cannot get future financial support if you are still paying off a loan. At times, you may develop a negative or poor credit score that will definitely affect your future loans even if you managed to completely pay off the loan.

 Many people have suffered from stress due to problems arising from debt payment. It becomes tough seeing your creditor and collectors calling you to make payments when you actually know you cannot make any payments. People get traumatized by the threats and harassment they undergo in order to pay the loan.

 This article does not aim at discouraging you from picking up loans for your personal needs. Instead, it exposes you to how debt can ruin your life without your knowledge. Before committing yourself to the creditor, think twice about the option and whether it is directly necessary.