Your guide to approaching loans and investments during financial planning
Having a financial plan in place can help you save for different needs. We tell you to go about financial planning when it comes to loans and investments.
Every person out there has dreams, such as owning a home of their own, sending their children to prestigious colleges in India and abroad, buying a luxury car and so on. But very few people actually sit down and plan out their strategy for achieving the dream. And since they don’t plan, they often fail to achieve their goals.
Financial planning is just not about investments. It is also a process that helps you in planning and managing your finances in a way that you are easily able to achieve your life goals. With different forms of loan available in India, consumers and businesses have various options for managing their financial situation better. As a result, credit management, too, has become essential nowadays. Managing your credit is an important part of financial planning.
Here are the different forms of loan products available in the market:
- Personal loan: Unsecured loans that help you to meet immediate cash requirements
- Home loan: Secured loans for financing the purchase of your dream home
- Credit cards: Unsecured debt that supports your day-to-day financial needs
- Gold loans: You can pledge your gold ornaments for finance
- Auto loans: Finance for purchasing a car, two wheeler and other vehicles
- E-commerce loans: Finance for sellers to sell products on online shopping platforms
- Other loans: Various other loans like lifestyle loan, doctor loan, health loan, engineer loan and many more to meet your various credit requirements
Effective credit management
Effective credit management can help you in deciding when to borrow, where to borrow and how much to borrow. This way, you can reduce the overall stress of debt, and also developing a financial discipline that will help you in minimizing the amount of interest burden on the loans.
Wants vs. Needs
Before applying for a loan, you need to first understand the difference between needs and wants. Your needs are something that are essential for your survival, such as food, shelter, clothes, health, education and other basic amenities of life. On the other hand, your wants do not impact your survival, such as cars, vacations, etc.
So when you are considering buying something financed by a loan, firstly, you should ask yourself if you can survive without it. You should take loans only to finance your needs, not your wants. Investing in a need, such as a first home, or any such appreciable asset financed by a loan will not have a negative impact on your portfolio. The interest amount shall be cordoned off by the capital appreciation. On the contrary, financing your wants can create an unnecessary burden and stress on your financial position and your income. You should save money to fulfil your wants instead of financing them through loans.
Secondly, you need to check whether you are in immediate need of the thing you plan to finance via a loan or not. If you are short on funds to incur its cost but can survive without it for a few more days or months or years, you should postpone your purchase till the time you are in immediate need of the product or have sufficient money to bear its cost.
The bottom line
Nevertheless, try to reduce, delay or eliminate some of your purchases and put a limit on your borrowing. By following this disciplined approach with your finances in the long run, you can purchase more of your wants.
Financial planning by prioritizing your investments and lowering your existing debts can help you lead a less stressful and more enjoyable life. Furthermore, it means you will have more money to spend at your disposal.
Are you looking for loans to fund your financial needs at low rates of interest? Opt for loans from Bajaj Finserv. To know more about Bajaj Finserv finance.