How To Borrow Smart

Credit can be a blessing or a curse. It can help you achieve many of your financial goals but it can also put you in a financial crunch. Know how to become smart with debt

- Narayan Krishnamurthy

Rising inflation, pressure on income and skyrocketing expenses have made household budgets go awry. Mumbai-based Ramesh Tripathi had a subdued 50th birthday celebrations in 2021, as his family of five, including his wife, two teenage children and 78-year-old mother, grappled with the impact of Covid on their lives. The uncertain period had made them stretch their financial reserves. “I was paying a home loan and had also taken a personal loan to purchase a second laptop, as my daughter needed one to manage her online classes,” he recalls. He is not new to taking loans and understands its advantages.

At one point, the Tripathi family paid almost 60 per cent of their income towards servicing loans. They had a loan on the house, a car, and some gadgets and had added a personal loan just to keep afloat for a short period. His older son had taken an education loan for his graduation, but with the pandemic setting in, his employment got delayed than the time frame he had anticipated. Their family is like any other that grapples with financial burden every now and then, when savings just don’t seem to be enough.

Meanwhile, 24-year-old Aditya Shetty, who lives in Bengaluru, is relieved for the payday loan that is available on a lending app he swears by. He has taken the loan every month since early 2022. “With no increment in the past two years, and rising expenses, I find my savings gone before the end of the month. I don’t wish to ask my parents for money,” he says justifying his dependence on a payday loan. Payday loans are meant for the working class who have difficulty in making ends meet, and are often broke at the end of the month.