Though some people may say that our generation has accepted financial loan as an evident part of life, I strongly condemn the idea of taking it. But there are times when, be it me or anyone else who detests the idea of taking a financial loan – takes it anyway to meet their financial obligations.

Every individual irrespective of their rank, their social and financial status, and their budgetary skills; runs into similar kind of financial problems. And despite having exceptional planning skills, they fail to prepare themselves for the life-threatening situations that just appear out of nowhere. Thus, whether you like it or not – one day- you’ll also apply for a financial loan under inevitable and compelling circumstantial pressure. Moreover, it’s not the action of taking a financial loan which should be criticized, rather, taking a financial loan for certain specific purposes that may lead to debt-trap is what people should oppose.

loan application in business folder showing financial investment concept

Here are a few situations when a financial loan is a big NO, NO:

1. Taking a financial loan to invest in an equity-linked scheme

Equity-linked schemes are prone to the risk of investment failure. Thus, you never know whether you are even getting back the principal sum you invested or not. In that context, it’s always advised to use personal savings to satisfy your personal urge to invest in the volatile market rather than using the borrowed capital for making investments.

2. Helping a friend using a financial loan

You can never control the life of your friend and neither improve nor manage their finance. Therefore, let your friend learn to handle his/her finance better and pull themselves out of financial crisis. If you want to prove your friendship, use your own money rather than taking a financial loan to help them.

Moreover, you can ignore but never deny the possibility that your friend may betray you, or fail to repay the money back, leading you into a debt-trap.

3. Financial loan for gambling

Gambling is an addiction and a gambler will never be satisfied no matter how many times they win or lose. Money is something that can corrupt even the purest souls. And if you are taking a financial loan to quench your thirst for gambling, think a little about the traumatic experiences that will follow you if you lose.

4. To bridge the gap in your monthly budget

If your budget fails once, it may fail again. This solely means there is a problem in your budget or your planning isn’t effective, thus, you need to plan a better budget rather than taking a financial loan to support your needs.

5. Cosign a loan agreement for people you don’t trust

It’s not a total NO-NO if you know and trusts the person you are consigning for. But, if you don’t know the person enough to predict their financial capabilities, don’t even think of cosigning the loan agreement. Considering the worst-case scenario, he/she will be declared bankrupt after failing to repay the loan and the lender will hold you responsible. In the end, you’ll have to repay the amount.

Bottom line: Our ancestors have repeatedly pointed out that there’s a solution to every problem unless the situation is out of one’s control. Thus, even if you are in a desperate need of money, don’t make a credit enquiry unless you are not capable. In India, money is the root cause of all problem and the same money is the solution to every problem. Thus, be sensible, use your options wisely.