Have you ever borrowed money to address a need only for the money to be given to you when the need is no longer there? Have you borrowed to purchase a piece of land only for the loan to be ready when the land is already taken?…Or to purchase fertilizer only for the money to be released when the planting season is over. Maybe you needed to take advantage of a slump in the share prices of a listed company and invest in it but the money came when the share prices had already risen. Maybe you saw a car being sold at a throw away price and rushed to your lender only for the processing to take so long that the money was given to you when the car had already been sold or the seller had changed his mind. All these are scenarios that face many borrowers. I’m tempted to ask; what did you do with that money?
For many borrowers, this position does not seem dangerous until things get out of hand. Many are delighted that at least they have the money and that the loan was not declined. One of the most dangerous things in the world of money is to have money without a plan; it is worse when the money is borrowed. It is advisable never to trust anyone, including yourself with money whose purpose is not defined.
The thing is this; we all can budget for money, any amount! If I gave you a million bob, you will not fail to get what to do with it, will you? So is the case for ten millions and so on. This human tendency is what makes it risky to have borrowed money whose purpose has been overtaken by events. But, just how dangerous can it get? Borrowed money often comes at a cost; if it’s a bank loan, the interest starts counting from the day of disbursement and the other upfront charges are already incurred. Within a short span of time, many of such borrowers have found justifications to spend the money on other ‘well deserving’ needs. In most cases, such needs are consumer based…Or will you go without food when your account is loaded? After all, how much will food consume from a whole chunk of loan money? Before long, they realize that what was once a chunk of money is no more!
Money is like that. For many people who lack the discipline required, availability of the money in their accounts relaxes their efforts of making money and accelerates their need generation; they create more spending ideas. Once the money is done, the reality of loan repayment sets in and begins to erode their spending power. To maintain the former living standards, such people inevitably resort to short term borrowing which is expensive and addictive. Salary advance and shylock books begin to bear their names. They get trapped! I have been there before and a good number of my clients trace their debt trap to such scenarios.
So, what to do? Prevention is always better. At all costs avoid getting yourself in such scenarios. Before borrowing, it is important to consider your lenders Turn Around Time (TAT). This is the time it takes from when one makes the application to when one gets the money. The nature of your need should dictate the nature of facility to borrow; if the need is urgent, the solution should also be urgent. Always ask about how long the process will take and give a reasonable allowance of time. If the TAT is longer than the need period, do not borrow! Most borrowers ask about their ability and swing into the paperwork only to be frustrated by the waiting period.
If you find yourself in such a case, your survival depends solely on your financial intelligence. If you are lucky to have another pending and well analyzed opportunity that can utilize the money and bring returns that make sense, then you can utilize the money in that manner. Seeking for help from wealth creation gurus might help but time is an important factor to consider. Converting such money to subsistence use is catastrophic. For those who are not properly exposed to financial intelligence, you are better off returning the money and bearing the small costs than risk facing the impending debt trap. I stop here because I know with this, YOU CAN DO BETTER!
Debt Management Consultant, Motivational Speaker and Author.
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