Why it is easier to acquire a loan than to repay

Why it is easier to acquire a loan than to repay

In day to day life we encounter good financial times as well as difficult times.  Our finances keep fluctuating and we must be equipped to handle both the good and the bad times.  Taking a loan may be one of the first ideas to come to our minds during financial hardships. 

Loans have become part of us to the point that sometimes you can’t resist approaching a bank, individual lenders or any financial institution to acquire one.  It is now clear that borrowing and lending have become a business and a profitable one especially to the lender. 

It may be quite impossible to avoid taking a loan because of the so many circumstances that surround our lives.  One may be in need of money to start a business or boost an existing business, you may not have enough cash to pay everyday expenses like rent, food, and utilities. 

Sometimes we take loans if there is a family member who has a medical emergency.  You may also need money to bail out a family member or a friend out of jail.  Whether it is death in the family or unexpected travel needs or anything else we need money and taking a loan is the only option if you don’t have that money. 

Experience shows that while it is easy to apply for a loan, it is hard and disturbing to pay back the loans.  Lenders have always tasted their share of the bitter wild oats when borrowers fail to pay back.  The situation becomes tricky for the lender especially in the case of unsecured loans.  May be it is okay for the lender in case of secured loans. 

For secured loans or mortgages, you risk losing your home if you don’t keep up repayments.  Similarly, if you have a hire purchase agreement for a car, it could be repossessed if you fail to meet this debt.  Of course losing your property to the lenders is not also good news but it may be the only way out. 

Failing to payback a loan is a common thing.  It is something that can easily happen at any time.  Perhaps you have lost your job, or gone through a family crisis, leaving you unable to meet your financial commitments.  But whatever the reason, you need to understand that it is important to compose yourself and approach the right people for help. 

As soon as you realize you are going to be unable to pay back your loan or meet repayments, talk to your lender about your difficulties.  See if you can come to an agreement with them by, say, reducing the monthly repayments and spreading them over a longer time period.  You may even be able to get interest and charges stop – or work out a debt plan

As a first step it is always wise to talk to the people you owe money to, and explain your situation.  They should be happy that you have contacted them and will work with you to create a repayment plan to suit you. 

If you are struggling to pay bills and loan repayments, make sure you get help quickly, and put a break on your spending.  It’s easy for debts to build up and become even harder to pay if you don’t take action as soon as possible. 

When you act very fast the situation may not run out of hand.  But this entirely works on the assumption that you are not dealing with loan sharks. 

Patrick Rothfuss once said that there are two sure ways to lose a friend, one is to borrow, the other to lend.  Recovering a loan is like breaking an egg to make omelet; we don’t want to break the egg yet we want to eat the omelet. 

People who borrow money from friends put their lenders in a tight position.  They need to recover their money from colleagues who have failed to pay and at the same time they don’t want to offend them.  It is also common for borrowers to relax whenever they are aware that the lenders are their friends and therefore won’t be hard on them. 

Borrowers ought to know that failure to repay a loan is in itself a breach of an agreement that destroys the lender’s trust in you.  Efforts must be made in repaying the loan and avoid taking multiple loans at the same time. 

Be sure that you actually need this loan and you have the means to repay.  Sometimes consider paying a little extra each month.  Paying extra each month can go a long way toward helping you pay off your loan faster.  Even making a small overpayment each month may reduce the Total Loan Cost.