[PAVAN KADAM]

Credit Cards - Had them all . CLOSED them 7 yrs ago and living in peace

Car Loans - The Maruti 800 was a loan then an overdraft, closed 7 yrs ago and swear not to take another loan after that.

Housing loans - Never felt the need, built it out of savings and living in peace.

Its not too tough to live without loans and credit-cards. Well planned earning v/s spending pattern has to be monitered and once you inculcate the habit of spending within your earning limits, life becomes easy. Dont stay a saint, but yet this is achievable.

Its been a good 7 years of debt free life in my household including my younger working brother. Life is much more better to live.

[PatienceWins]

Originally Posted by PAVAN KADAM

Its not too tough to live without loans and credit-cards. Well planned earning v/s spending pattern has to be monitered and once you inculcate the habit of spending within your earning limits, life becomes easy. Dont stay a saint, but yet this is achievable.

When I get tempted to get expensive items I WANT (happens quite often as per my wife) - Team-BHP is a major culprit here - I think about people who live in poverty. It helps me, though I succumb sometimes.

[poloman]

Living debt free life is not an honour as it is made out to be. On a personal level, to experience simple joys of life some amount of debt may be required. On a larger socio-economic level, if everyone desists from taking debts and there by risks, that will be end of entrepreneur ship, innovation and lot many such things, which drive humans. If everything in life is under control, predictable and risk free, I miss a motivational factor. To me what matters is how you manage your debts..! I derive pleasure in devising ways to retire them much ahead of the planned tenures.

[asdon]

Originally Posted by PAVAN KADAM

Housing loans - Never felt the need, built it out of savings and living in peace.

I really want to know the Mantra, how to get a House in Bangalore, comming from out of the state, with lets say 5 yrs of work exp(2007), and not taking a home loan?

[Samurai]

I have always used credit cards, for the convenience. But I pay in full every month, so I don't think of it as debt. I don't use it for transactions I can't pay off at the end of the month.

I too was afraid of loans after seeing the amount of trouble my dad went under for building a house. I abhorred taking loans. Then I did my MBA, and finally understood finance. Loan is a very useful tool if you are responsible with it.

Loan is a not a plague, but a very powerful financial tool. Used responsibly, it can help enhance your life. Misuse it, it can turn your life into hell.

[ampere]

Buying a home with a loan is fine, provided one does not end spending all the salary (or a
substantial part of it for EMI). If you see this has become the order of the day.

Folks dream of larger-than-life lifestyle/luxury homes. And in order to meet such dreams,
people invest money much-much more than what they can afford. That is where home
loan starts becoming more of a debt rather than an investment. Now one can argue that in
the end, persons spending this way would still end up with a costly house. But I look at it
this way: Since they start staying in that house, it has become a liability rather than an
asset.


If the EMI are within the limits of financial planning (long/short term investment, liquidity
holding etc) home loans can still be seen as a an agent of investment.

The only caveat is when one starts early in life on the home loans, the risk appetite is
much higher, as the person would be earning, and would not be married. Hence he can
start with investing more than his fair share of salary. This is also with an expectation that
as one progresses in his career, he would get pay hikes and as a result his contribution
toward home loans (long term investment) would become a lower fraction of his/her
salary.

[NinadJoshi]

I believe in a debt free life, and try to remain without a monkey on my neck as much as possible. A simple life can be a good one too.

As of this moment the only debt I have is a home loan, which is imperative considering I certainly can not pay off a house. Other than that, zero debt.

I use one credit card, whose payment has never missed the date.

I buy cars only when I can afford to pay 100% cash for them. Stuck to my principle for all the 7 cars I have owned to date.

I have not bought a single stock (share) in my life.

For what my self proclaimed saintlyhood above is worth, I also deeply admire people who are not afraid of money. These are friends/people I know who undertake huge loans for their entrepreneurial quests with the ease of shopping at a grocery store, who live happily with maxed out credit cards and underwater mortgages, run into huge losses on the stock market, and are yet cheerful about life and full of the 'tomorrow will be a fantastic day' attitude.

[kaushik_s]

If I don't take loans then I won't be able to live my life. When I say "live my life" I meant about enjoying my time here on planet earth with the possible extent (obviously within social and financial norms/limitations). I would take loan if I need to take it and I don't abhor it. I'm not that patient to wait for 10-15 years to slog day and night and wait for my turn to come to have enough money and buy that car/gadget I always wanted. What about those 10-15 years that has been lost just for making that money to enjoy that special car/gadget? May be after 10 years I won't be even able to enjoy it like I would have when the time was right. That's my point of view and I guess many others also think the same way.

[StarrySky]

I agree with those who are of the opinion that loans are a powerful tool if used responsibly.

For those who consider loans as evil, I'm probably the very incarnation of evil - I have 2 home loans (not huge amounts, though) and a personal loan. I also have a credit card.

While I had all those loans mentioned above, I also took a 7-year car loan, which I paid off in 1 year with my savings during the year. I regularly pay extra to one of the home loans from my savings and I hope to close it by the end of next year.

I use credit card quite extensively, just for convenience (no need to carry cash). I don't use credit cards to buy things on impulse or those that I can't afford (simply because the interest rate is 37.5%).

Do I sleep peacefully knowing that I'm burdened with all these loans? Yes!! I've planned my EMI outflows so that I can take a 25% cut in my salary without affecting my ability to pay the EMIs while living comfortably (it will just mean that I won't be able to pay extra each month to close the loan faster). And if I lose my job, I know I can sell one of the two houses to pay off all the loans (even if I have to sell it at 20-25% less than the market rate).

Of course, it helps that:
- I don't smoke or drink or frequent pubs or parties
- My wife understands how much I earn and how much we can spend on things
- My daughter understands that there are some things that her father cannot afford, while others can

[maverhick]

A good rule of thumb that I follow is to never buy a depreciating asset on an EMI. So I hope never to buy a car/bike/anything that depreciates on an EMI.

[carbookie]

Originally Posted by maverhick

A good rule of thumb that I follow is to never buy a depreciating asset on an EMI. So I hope never to buy a car/bike/anything that depreciates on an EMI.

I have to agree that this is a good strategy to follow. I would also like to add that i think people who take loans to finance business or higher studies are doing no wrong.

[DieselDon]

Except if your surname is Tata or Birla, a Loan is your best/only source for investment/growth.
So, middle-class bhpians, please do read up & also educate the family. Only if you/family know what one means by 'being responsible' you can be so.

A) Home Loans are Good. But do 'Read up':-
i)Example from my life: I bought a house under loan in 2004 for 14 lakhs. Today the house is worth 28 lakhs!(got lucky). I am yet to pay 6 lakhs to the bank. (which I can, but will not - since I am getting a tax rebate & the interest rate is 7.15% fixed)
ii)Another Example: I bought a second house under loan in 2008 for 28 lakhs. Today the house is worth 30 lakhs only(not so lucky). I am yet to pay 24 lakhs to the bank (which I am preclosing soon - since the interest rate is 12.5% floating)

B) Personal/Car loans are costly. But do 'Read up':-
I have taken and closed several Personal Loans to fund my initial investments in the above home loans. I once had a personal loan at 11%. Others were at 13-13.5%.
My car loan though, went through its 5 yr tenure. I could have closed, but diverted to a land investment which showed promise of 25% return.

C) Credit cards are not that Bad : But do 'Read up':-
I use 3 credit cards regularly. Card 1 which gives me back Rs 4 per Rs 150 spent on fuel. Card 2 which gives me back 5% of all my Utilities(Electricity Bills, ULIP/Insurance EMIs, Mobile/Internet Bills) & Rs 2 per Rs 150 at Departmental/Grocery Stores. Card 3 that give me Rs 1 for every Rs 125 spent for any transaction.
Now tell me why I should pay cash for the above essential spends. But, do not take a loan on Credit Card. 36+%.

Cheers & be responsible.

Originally Posted by Samurai

Loan is a not a plague, but a very powerful financial tool. Used responsibly, it can help enhance your life. Misuse it, it can turn your life into hell.

Originally Posted by ampere

If the EMI are within the limits of financial planning (long/short term investment, liquidity holding etc) home loans can still be seen as a an agent of investment.

Originally Posted by StarrySky

- My wife understands how much I earn and how much we can spend on things
- My daughter understands that there are some things that her father cannot afford, while others can

[dockap]

Originally Posted by Samurai

I have always used credit cards, for the convenience. But I pay in full every month, so I don't think of it as debt. I don't use it for transactions I can't pay off at the end of the month.
Loan is a not a plague, but a very powerful financial tool. Used responsibly, it can help enhance your life. Misuse it, it can turn your life into hell.

Have to agree 100% with Samurai. I have no loans and i use my credit card only to pay for my phone and mobile bills ( saves me the hassle of trying to find a parking space outside the telcom co office which are located at places with hardly any parking space) and the occasional ebay item( which is not available in my city) online.
I always clear off the credit card dues at the end of the month at the bank near my house which has adequate parking space.
Loans are good for salaried people with secure jobs who don't have to loose sleep on how they will pay the months EMI.

[gauravdgr8]

An excellent topic. Well my life is debt free. The latest acquisition my car was bought cash down.

Disposed all credit cards way back in 2006. No Personal loans. Actually have a totally different account called the splurge account wherein money is deposited every now and then and the monthly/quaterly/half-yearly road/rail/flight trips are paid from that account.

Don't intend to sleep with a pressure that I have loans going out on the 1st of every month.

[asdon]

Well majority says Home Loan is good and car/bike loans are not so good. But I have a home loan and a car loan and I am more happy with my car loan as my company has a lease scheme through which I get tax benefit on entire EMI amount, so if you get something like this then even car loans are also not so bad option.

Those who are for Debt free life they are of the opinion that do a lot of saving then buy something, and reduce your saving. And god forbid if you loose your job at that point? You don't have savings, you sell your asset at a less price, did you guys think about this scene? Job lose can happen to both types who takes loan and who enjoys debt free life.

So if you compare positives and negetives, don't be selective as all positives for debt free and all negetives for loan takers. I see people saying they have not taken home loan, may be you live in your parent's house or you really earn some green bucks or you got lucky with your investments or on a lighter note you are a 420 type.

I know a real life story that of my father's. He worked in central govt, stayed entire life(job tenure) in Govt flat, though many of his friends took loan and moved into their own house. But my dad never thought of taking loan, at the end, when he retired he put all his savings and investment in purchasing our house, and just two weeks before we moved in, he passed away, so he never enjoyed his earnings. Though this one was little personal I thought of sharing, so don't push hard for a debt free life, if you can be responsible enough towards your debts, because the time will never come back.