Being a responsible borrower

Welcome back to “Weekwise Finance,” your trusted source for data-driven financial insights. Dear readers, borrowing is a financial practice that has become integral to modern life. A research shows that as of 2022, nearly 47% of Indian households have some form of debt, ranging from mortgages to personal loans and credit cards. While borrowing opens doors to opportunities, responsible borrowing is imperative for financial health. Credit can be a powerful tool, provided it is wielded wisely. A comprehensive study conducted by the Credit Bureau of India reveals that an individual’s credit behavior can significantly impact their credit score. A strong credit score, in turn, can affect their ability to secure loans and favorable interest rates. Effective credit management is, therefore, a balancing act.

How to Borrow Responsibly?
Responsible borrowing is a multifaceted practice rooted in data-backed principles.


Assess Your Needs: Research indicates that nearly 35% of borrowers in India take loans for various personal needs, while 28% use them for education. It’s crucial to assess whether the expense is a necessity or a luxury.

Budget and Plan: According to a recent survey by a leading financial institution, individuals who create detailed budgets are more likely to borrow responsibly. Your borrowing decisions should align with your budget and financial goals. Mr. A. Joshi, a seasoned financial advisor, in this connection emphasizes, “The importance of responsible borrowing is substantiated by data. Borrowing in alignment with your financial goals is a fundamental aspect of financial health.”

Compare Lenders: A study by a prominent financial research firm highlights the significant variations in interest rates and fees offered by different lenders. It’s advisable to compare lenders for the most favorable terms.

Read the Fine Print: A comprehensive analysis of loan agreements by financial researchers has shown that borrowers often neglect understanding the terms and conditions. This can lead to financial stress. It’s essential to scrutinize interest rates, repayment schedules, and any hidden charges.

Borrow Only What You Can Repay: Data indicates that excessive borrowing is a common pitfall. By borrowing an amount that aligns with your financial capacity, you reduce the risk of overextending your finances.

Effective credit management is a practice supported by data-driven insights:

Paying Bills on Time: Multiple surveys and reports show that timely payment of credit card bills and loan installments is the key to a healthy credit score. Late payments have a detrimental effect.

Managing Credit Card Balances: A study conducted by a leading credit advisory firm reveals that individuals who maintain their credit card balances within 30% of their credit limit tend to have higher credit scores. High credit utilization can impact your credit score negatively. Also pay in time and pay in full. Rotating credit card amount attracts massive interest.

Avoiding Unnecessary Debt: According to a recent economic survey, unnecessary debt is a prevalent issue. It’s recommended to refrain from accumulating excessive debt, opting for credit that is necessary and manageable.

Tailpiece: Credit expert Ms. P. Verma says, “Data-driven credit management is the cornerstone of a sound financial journey. A strong credit history, supported by timely payments and responsible borrowing, opens doors to financial opportunities.” Responsible borrowing and effective credit management are critical components of a secure financial journey, as affirmed by various studies and data. By integrating these practices into your financial routine, you pave the way for a brighter financial future.

In our next edition of “Weekwise Finance,” we’ll explore the nuances of investment diversification, examining strategies for building a balanced and data-informed investment portfolio. Your feedback and questions are invaluable in shaping our exploration of the financial landscape.

(The author, a seasoned professional with an MBA, NET, and IBPS credentials, operates within the Middle Management tier of a reputable PSU Bank. The views presented in this column are personal.)

(This column is designed for informational purposes and doesn’t constitute financial advice. For personalized guidance on responsible borrowing and credit management, consult a financial advisor.)

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