It’s not unusual for people of this decade to feel tempted to avail of instant online loans from apps like Kissht to fulfill minor financial obligations. After all, we live in a world where instant credit options are just as close as the distance between the fingertip and a smartphone screen. While there’s nothing wrong with using instant personal loan apps, optimal usage necessitates mindfulness. Broadly, the term associated with the act of borrowing money while being mindful is called responsible borrowing. 

Steps to becoming a responsible borrower:

1. Assess needs: 

Identifying how much funds are required is the next thing to figure out after a person has become sure that there’s no other way to fulfill financial obligations other than taking out a salary loan. Borrowing beyond what’s required may lead to an unnecessary financial burden or even a debt trap. Conversely, borrowing less than what’s required can result in having to take further debt.

2. Choose the correct loan type:

The type of loan to borrow from a platform like Kreditbee would differ depending on the principal amount required. It’s important to borrow the correct type of loan because certain loans may help a borrower qualify for tax exemptions and other benefits. Consider this situation: a student in their penultimate year of college is lacking funds to pay their fees. They could take either a student loan, or a personal loan. However, taking a student loan would be more beneficial since the student may be exempted from paying the EMI until they’ve graduated. This would make financial management easy.

3. Check financial health:

Before proceeding with the decision to borrow a loan from an app like Navi, either from a bank or an online loan app, it’s important to have a clear understanding of personal financial health. Below are the factors to consider:

• Credit score: The greater, the better the chances of qualifying for a loan at favorable terms.

• Monthly income: It’s best to choose a loan offer whose EMIs can be comfortably paid using the monthly income.

• Savings: In case the borrower is unable to pay the EMIs with their income, savings are going to be the lifeboat. 

• Existing debt: Every loan is a financial responsibility. Existing debt can lead to the inability to take on any more obligations if repayment capacity is already maxed out.

4. Weigh-in future goals:

It’s important to consider any big future financial goals before borrowing long-term loans from apps such as nira. Liquidating savings or investments that were meant for some other purpose, like starting a business or funding education, can result in additional stress. This is especially true if the borrower is unsure of whether they’ll be able to recoup the savings they’ve used for EMIs.

Additionally, if the borrower is in the process of saving up for their future, they should consider whether the new EMIs would obstruct plans. It’s best to choose a loan that has terms that align with future goals and repayment capacity without being much of a hindrance to long-term financial goals.

5. Accept uncertainty:

If a borrower is reliant on stock market investments and active or passive income for paying the EMIs, it’s wise to have a Plan B. In case the funds a borrower was expecting don’t come through due to market volatility or income disruptions, paying EMIs could become challenging. Therefore, before taking on major loans dependent on volatile income streams or investments, ensuring adequate savings are in place can provide a safety net.

The Bottom Line:

Being a responsible borrower is not an inherent ability but rather a skill that requires thought and discipline. By accurately assessing repayment capacity, personal circumstances, future goals, and financial needs, a person can make the choices that are in their best interest.