Borrowing money back is OK as long as it doesn’t endanger one’s financial stability. This is known as sustainable borrowing, and advocating it will serve as an encouragement for others to manage borrowed money more wisely.
At the same time, it takes a lot of effort and commitment. To show that sustainable borrowing from legalised money lenders in Singapore or any other debtors is achievable, we will discuss what sustainable borrowing is, the signs that it’s possible for you, and how you can go about it.
What is sustainable borrowing?
Let’s say you took out a loan to cover secondary or discretionary needs, like paying for your family’s hotel stay on a day trip. You didn’t want to take out the amount from your monthly income, as it would put excessive strain on the funds allocated to cover your essential expenses. To get that cash for your trip, you would rather approach a trustworthy money lender to preserve your long-term financial stability and well-being.
And when you’ve previously visited a reputable moneylender to obtain that cash and have agreed to repay the loan on a specific date, you pay the loan back on schedule, or even before schedule. Lastly, thanks to proper planning and budgeting, you managed to pay the debt without negatively affecting your ability to meet your everyday needs financially.
This is how sustainable borrowing works: borrowing in a way that avoids stressing the resources of individuals excessively, creating unmanageable debt, or hampering long-term goals. People must have a great deal of dedication to manage the payments to accomplish this, and not everyone can do that.
How important is sustainable borrowing?
Sustainable borrowing matters for many reasons. The first and biggest benefit is the avoidance of financial strain and excessive debt. Another is maintaining creditworthiness, which is a factor that will remain with those who take on debt, regardless of the source—banks or money lenders. And if you are financially healthy and have good credit, you can save and borrow money for your long-term objectives, such as a business or a house.
Lastly, you lessen the possibility of small financial problems that trigger larger ones when you accept your obligation to pay back your loans. That way, you avoid big money woes in the future.
Hallmarks of Sustainable Borrowing
Those who practise sustainable borrowing look at long-term financial consequences, such as interest rates, fees, or repayment terms. They also do an in-depth assessment of the risks attached to debt, such as their capacity to repay the loan, their creditworthiness going forward, and an analysis of any default risk. In contrast, your average borrowers fail to take these considerations into account.
What are the signs that you can achieve sustainable borrowing?
You have the right attitude
Before making any borrowing decisions, you must be aware of their financial situation, which includes reviewing their income, expenses, debts, and credit responsibilities. You must also intend to keep your spending habits in check and fight the urge to spend money on unneeded expenses.
You can budget
If you want to borrow money sustainably, the goal is to efficiently manage your finances by correctly setting how much money to set aside for savings, debt repayment, necessary expenses, and discretionary spending.
You are realistic about their income
A realistic income, whether from a steady source of work, self-employment, assets, or other sources to support debt repayments, is one of the biggest factors for sustainable borrowing. An adequate income must be able to pay for debt repayment, savings objectives, and normal expenses, with wiggle room for unforeseen needs or emergencies.
Conclusion
If you wish to have long-term financial stability while taking out loans, sustainable borrowing is an important skill that you have to learn. So, before you go to a Bedok money lender or another money lending service, it’s important that you try to see if you have the necessary attitude and income to achieve it.