Is it Necessary to Request a Loan During an Economic Crisis?

In times of economic instability and currency depreciation, paradoxically, there is a burst of purchasing activity. Citizens are beginning to actively invest in various goods, reasoning in this way: “Tomorrow the money may depreciate so much that I will not be able to buy anything at all, but at least I will have a TV (refrigerator, new phone, apartment, etc.)”.

Purchase options in India and rental

And if there are no savings, people go to banks, which call citizens and offer loans several times a day.

However, if you take out a loan, you have to clearly understand three things.

First, why or what will the funds be spent on. The loan should be taken only for development, that is “for a specific task”. Development – means everything that will bring income in the next three or six months.

Secondly, how much to ask for. Know the exact amount (up to 0.1$), how much is required “for this task”.

And, thirdly, under what conditions are you ready to take a loan.

The combination of these three conditions gives a basis for making a decision “to take a loan or not”. It is important to understand that a loan is an additional obligation, under which you have no security. Otherwise, there would be no need for a loan.

It is recommended to balance your desires and possibilities sensibly. Ask yourself the following questions:

  • Is there any chance that you will lose your income because of the crisis?
  • Do you have a plan “B” for an emergency?
  • What happens if you get ill and go on sick leave for a long time?
  • What happens if you have problems at work?
  • How much money are you willing to give away to the bank painlessly, won’t it affect your lifestyle?

To understand your ability to service your debt, we recommend analyzing your current financial situation: Do you have any outstanding loans, how much you owe to the banks, how much income you have and how stable it is. It is known that the amount of credit should not exceed 20% of your income.

If you are sure that the loan is vitally important for you now – you have been planning to buy a house for a long time, because you live with your parents or in a rented apartment, you need to urgently finish the protracted repair, and in the near future the loss of your job and worsening of your financial situation do not threaten you – then you can take the loan at

And how do you choose a loan?

One of the main parameters of the loan is, of course, the interest rate. In addition, banks must print the full amount of the loan on the first page of the loan agreement in a large and easy-to-read font. And both in interest and absolute terms.

The full cost of the loan is not equal to the interest rate per annum, it is the sum of all your interest payments, as well as other expenses, payments to third parties, including insurance fees. That is, in other words, you can say that this is your total overpayment on the loan for the entire term of the loan.

In times of crisis, you are not advised to take loans with a floating rate, as well as loans in foreign currency – this significantly increases the risk of a serious increase in monthly payments during the loan term.

Optimal option: a loan in national currency with a fixed or differentiated rate (a differentiated rate is a rate that decreases after a certain event).

If possible, it is better to repay the loan early, although in conditions of high inflation it may not be too profitable if the currency in which you took the loan starts to depreciate rapidly. On the other hand, nobody knows exactly what can happen tomorrow. In the long run, unfortunately, anything can happen to us: a reversal of the rate, loss of employment, health problems. So if there is an opportunity to repay the loan in a larger amount – put it out. But do not forget to leave enough money for life and unexpected expenses to obtain an “airbag”.

Interesting Related Article: “What is a Loan?