I have been a victim of this Loan effect. Of late I planned to buy a house and some months back I had purchased a car. On both occasions I was faced with the problem where I could not decide whether I should go for Loan or go for cash down. The problem was more complex at the time of purchasing a car, for house the loan sort of becomes mandatory and the only thing that needs to be decided is the amount of loan.
I would advice that Loan should be avoided as far as possible. Moreover we should refrain from taking Loan on depreciating assets such as a car. The motive behind this is simple, we should play safe. Suppose in case there is some issue and we are unable to pay the loan back, the amount of loan could not be recovered even after selling out the car. There is also a theory that opposes my thought and says that the value of money decreases with time and the value of an amount that you pay today will not be that significant few years later and one can easily pay. I would advise safe play, hence reject this school of thought.
For the purpose of purchasing a house, loan becomes mandatory. In today's world it not easy for a Salaried Person to buy a house on Cash Payment. The fact that House is an appreciating asset and its value increases with time plus it gives a tax rebate makes it that more suitable. But it is a big burden that plays on people's mind till the time they shed it off their shoulders. I know this gentleman by the name of Kushagra Deep who has a running house loan. Once asked what will do if you get a jackpot, he humbly replied 'Will Repay the Home Loan'. So things are not as simple as they appear from a distance. It keeps on playing in your sub conscious mind and keeps you engaged. Next time when you decide for a Loan, think over it and when you are fully satisfied and content only then go for it.
I would advice that Loan should be avoided as far as possible. Moreover we should refrain from taking Loan on depreciating assets such as a car. The motive behind this is simple, we should play safe. Suppose in case there is some issue and we are unable to pay the loan back, the amount of loan could not be recovered even after selling out the car. There is also a theory that opposes my thought and says that the value of money decreases with time and the value of an amount that you pay today will not be that significant few years later and one can easily pay. I would advise safe play, hence reject this school of thought.
For the purpose of purchasing a house, loan becomes mandatory. In today's world it not easy for a Salaried Person to buy a house on Cash Payment. The fact that House is an appreciating asset and its value increases with time plus it gives a tax rebate makes it that more suitable. But it is a big burden that plays on people's mind till the time they shed it off their shoulders. I know this gentleman by the name of Kushagra Deep who has a running house loan. Once asked what will do if you get a jackpot, he humbly replied 'Will Repay the Home Loan'. So things are not as simple as they appear from a distance. It keeps on playing in your sub conscious mind and keeps you engaged. Next time when you decide for a Loan, think over it and when you are fully satisfied and content only then go for it.
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