The first day I took a girl home, my dad asked me to touch my chin, then observing me carefully, he asked, “what do you feel “, I replied, “it’s as smooth” maybe I would have added “as a babies bum”. He then retorted, “Tell the gal to go back to her mama, you are not yet qualified to have a woman”. Today, many years later, I reminisce that lesson, according to my dad; I needed to have grown a beard before I could get myself entangled in the bitter sweet mysteries of love. In everything that we do, especially borrowing, we must understand the consequences, and this requires that we have attained the minimum qualifications to handle whatever it is we want to engage in.
Debt traps are real for borrowers, just as broken hearts are for lovers. Borrowing temporarily satisfies a need, leaving you momentarily satisfied, but soon this bubble is busted, for the lender comes knocking, demanding to collect more than what was lend to you, in the name of interest.
More often than not, a need usually arises out of the blues and impulse tells us that the need must be satisfied now even if we do not have the resources to do so right away, leaving us with no option but to borrow. We humans are wired to be lazy and to take the easy way out, therefore instead of thinking of alternative solutions to meeting the arisen need, we think of the fastest way out, which usually turns out to be borrowing.
In a state where you are pressured by a need, be it physical like hunger or external like school fees, you are not reasoning with your head, but rather, you are looking at the problem at hand and trying to resolve it with the most minimum mental effort. You stupidly count yourself lucky because there is a lender willing to bail you out, yet you are welcoming yourself into a debt trap, which will take you years to overcome, because your income is not going to grow overnight for you to afford to handle the repayment and the interest thereof, especially where you have borrowed for consumption purposes.
Before borrowing, its important to ask whether the arisen need is a matter of life and death. Can you postpone this need or must you have it now? If it’s not life and death, good judgment dictates that you can postpone it and find better ways of financing like saving and or working for it. What’s the life and death in taking your girlfriend out that you must borrow? Even Isaac in the bible toiled for seven years to get the girl he wanted. Why is the next smart phone a priority for you and why are you borrowing to indulge in binge drinking or crazy house parties? Why are you borrowing to finance your lustful sexual escapades, you can’t die even if you missed it for a year or two?
Back to my dad, to borrow, you must be aware of a few important concepts like the difference between annual and monthly interest rates, repayment amount, Kenya Banks Reference Rate (KBRR) and even the difference between lenders such as shylocks, Sacco’s and Banks. How are interest and monthly repayments calculated, what is the difference between simple and compound interest and what are the consequences of defaulting on your repayments? If you must wait for your financier to calculate any of the above financial parameters for you, you are still a toddler in matters borrowing and you should not be borrowing, but rather joining a financial education class, to grow your beard in this matter.
Borrowing is a very effective way of building capital because it’s the only way that owners of capital share this economic resource with owners of ideas, who then use these funds to convert the ideas into useful products and services for sale at a profit, effectively redistributing wealth and capital within the populace and reducing poverty. By borrowing wisely, we bridge the timing gap between income and expenses and get continuous business operations, because lack of working capital means no production in business.
Once knowledgeable in matters loans, borrow wisely to invest and not to spend. Investments that you pump your money into should be well researched to earn a return higher than the interest on the loan. Seek information and help from your financial partners when in doubt and remember all money borrowed must be paid back and interest paid to the lender forms part of your expenses which can escalate beyond your capability, effectively jailing you in a debt trap.