If you’ve started becoming financially aware, you’re inevitably going to notice that loans have become an important part of society. And more likely than not, you’ve already taken one out yourself, whether it’s from a Bedok money lender or someplace else.
At the same time, you might be wondering why this became the norm. So, in this article, we will look at why loans have become such a big part of modern financial planning.
The Rising Cost of Living
Over the years, we’ve seen the price of necessities such as housing, transportation, and healthcare constantly increase while wages fail to keep pace. For example, buying a home can seem nearly impossible without a mortgage, especially for those at the very beginning stages of their career, that is why it became a necessity instead of an option for most homebuyers. This is particularly true in cities with high costs of living especially in Singapore.
Education and Employment
Education is a key player when it comes to moving up the career ladder, but let’s be realistic — it costs a lot. The prices for higher education have surged over the past few decades, and for many people, being able to pay so much upfront has become impossible. Ultimately, student loans have become a near inevitability in the equation. Nobody wants to be in that much debt, but when the cost of a degree is so high, it frequently seems like there’s no other option, since college education has become a necessity.
On top of a degree, today’s dynamic job market for various fields requires upskilling, and could even mean the need for additional degrees. In specialized domains, this is particularly crucial because you often need to educate yourself before being able to move up a career ladder. The necessary education to further move up the career ladder doesn’t come cheap, but can be worth it if you know how to weigh the pros and cons.
Emergencies
Life is unpredictable. Despite our best-laid plans, emergencies can happen at any time. When such unexpected events occur, the urgency of the situation often means that people have to pursue any financial means needed to resolve the immediate problem. Sometimes, that means loans.
For many, there’s little leeway to build up an emergency fund big enough to address certain emergencies. Thankfully, loans are a convenient and manageable route that allows them to pay for the necessary expenses without exhausting their cash on hand or becoming desperate to sell their belongings.
Interest Rates and the Economy
Credit has become more widely available, and the allure of low-interest borrowing has grown stronger, particularly for significant purchases like homes or cars. This shift has led many people to make larger purchases earlier than they would have otherwise. At the same time, they run up debt more quickly and much bigger earlier than they should have, but they can be manageable with proper financial management and correct prioritization of their goals.
As you consider your borrowing options, it’s critical to look beyond the immediate appeal of low interest rates. Ultimately, it’s about understanding how you can benefit from the debt while understanding its effects on your finances.
Conclusion
Loans are a crucial tool in the present economic environment, especially for young professionals. The continuous increase in the cost of living and education, the inevitability of emergencies, and low interest rates have helped loans be an appealing choice. The reason we focus on loans is that while they offer immediate cash relief, long-term obligations are attached to them, and we must be cautious of that to not fall into a debt trap.
