Borrowing Money As A Solution To Financial Problems?

Solution To Financial ProblemsGood day to you, my reader! We are going to discuss another important lesson about money: You should not consider borrowing money as a solution to financial problems.

It happened to me, and until now I am still wrestling with the liabilities that I got due to my stupidity. I have my own share of stupidity and I am not ashamed to admit that.

In fact, I’m blogging about them here, to guide others not to fall into the pit that got me. If I can warn more people about the mistakes that I made, I may save a lot of lives, or families from disintegrating.

It is true, financial problems affect families more than any other factor.

How Did The Problem Start?


It all started when I decided to start a pharmacy business in a community where the average net income per day per household is just $3.

I don’t have enough capital then, but I have high hopes then that through determination and my willing to help the community get access to vital medicines my business will succeed.

Pharmacy

You can imagine how hard my situation was when starting out, there were certain medicines that I can provide all because there isn’t enough capital for me. To complete the list of essential drugs, I took out a loan from a bank.

I thought that additional capital will help me solve the problem, but later I realized that I should have considered also the fluctuations in sales. In an agricultural area like ours, people’s liquidity is largely influenced by seasons—seasons like crop harvesting.

In between harvest times, people struggle financially and also business sales.

If you have a business where sales are affected by seasons, or your business’ market grows and shrink with the seasons, the last thing that you would like is having a loan you have to pay no matter what.

Here Comes The Due Date


My initial goal was to set aside money diligently for the the repayment of the loan. By saving $3 per day, my mind was set to making payments in due time but unfortunately it didn’t turn out as planned.

Of course, during the first months, it went according to the plan. I was able to save money for the repayments via setting aside a portion of my daily revenue. But then, when the sales started dipping down, the problem began.

I got no other choice but to borrow money… Yes, I borrowed money for the repayment of borrowed money!

Sad Face

If I didn’t do it, then probably I became a delinguint borrower and my credit score damaged. The problem with this is, you struggle to protect your credit score by artificial means—borrowing money from Peter to protect your credit score with John.

Can you guess what has just been created with this?

My liabilities multiplied. Loans multiplied until there were so many of them to repay.

As I look at my drugstore now, I feel like I am no longer the owner of this business. The real owners now are the lenders, the loan sharks, I am now a custodian—their employee that’s tasked of overseeing their business.

The Mystery of Due Dates


With bank loans, due dates are a normal part of lending.

But if you are a person borrowing money from a person, my advice for you is to avoid agreeing on a specific date of repayment as much as you can.

In most cases, the lender will usually ask for a fixed date of repayment, whether in part or in full. And it is a normal practice for banks and financing company to set due dates of repayment, while with individuals, you can negotiate.

If you can, try negotiate with your lender (if you are borrowing from a friend) to not have specific date of repayment. Like for example, instead of promising him to pay in May 30, just promise to the lender that you will repay him either last week of May or first week of June.

That is if he will agree to that proposal.

The reason I sugges this is, if you got in a situation wherein there is no other choice but to borrow money to repay a borrowed money, you will obliged to take out a new loan to prevent from defaulting in your promised repayment date.

Your liabilities will multiply, and they will drag you down further.

Conclusion


Money has a mystery.

Money

It is not that evil thing others think of. It is in fact dependent on the person handling it. If the person is smart financially, that person can make that money work in favor of him. But if the person gives in to stupidity, money might work oppositely.

And since money can become a hard working servant to anyone who knows how to control it, it can multiply. And so the financial problem of the person who mismanage it (just like what happened to me).

Now, are you in the same situation like mine? Are you considering borrowing money as a solution to money problems?

Be wise and as much as possible, be aware of what negative potential due dates have. Trying not to default in due date by borrowing money can get you deeper in debt.

But there’s good news, you have the power to change the course of your life. You can let the creditors just scream at you, just assure them that although you can’t make it to the due date, you still have plans to repay them. This may be a very unpleasant option but at least, it won’t multiply your debt.

10 Comments

  1. Faheem

    Hmm, makes sense for one to keep in mind the seasonal aspects in business as well. Since many people online don’t necessarily have to deal with it I haven’t seen too much mention of that. Multiplying loans in general are a messed up concept to begin with which make you more and more dependant upon others. Guess this is why some religions strongly prohibit the concept of interest and criticize those who justify it by comparing it to a trade they provide. Just ungodly practices, I suppose one could call it. Explains why it’s so widespread in the modern secular world. 

    This is why online marketing is interesting I suppose,because you can be your own boss. You can do your own thing.

    • Gomer

      You’re right, it is an ungodly practice, but unfortunately many people are getting hooked by bad loans due to life’s circumstances. One example is me.

      One thing that I didn’t mention in the blog post is, I also have an online business which is this blog. Though it is not making me money yet, I have this gut feeling that this will be a game-changer for me as this does not require so much capital to maintain. In fact, this online business (my blog) now operates like it’s for free since my credits from WA Site Comments are already enough to pay for the monthly fee.

  2. Strahinja

    Thank you for this informative article. It was really an eye opener. Almost same thing happend to me and from that day I said to myself that I will never ever try to get a loan or a credit as a way of starting business. My first business venture was a regular mini market in the neighbourhood and it actually started quite well – untill they decided to erect another famous supermarket. 

    This completely destroyed my business and I had to close down a few months after that – still in debt.

    So a lesson on money and loans by me – build it only if you are 100% certain that your business will be able to at least return the first investment and credit or a loan.

    Strahinja

    • Gomer

      I’m sad to hear what happened to your business venture. That’s business, sometimes competition will run over you and there’s nothing you can do but fold down your business. I hope if that happens to anybody, they do not have loans to repay or else, that would be so stressful. I know because, it happened to me.

  3. Dr. SD

    Your article provides a nice suggestion for borrowing money. I normally don’t like to borrow money either from a friend or from the bank. Yes, many years back I did from a friend but returned before time.

    Now see where the problem arose. 2 of my friends borrowed money from me. The total amount is not small. They set a few alternative dates for return as you said. When the date passes away they again set another date. Interestingly, I didn’t receive my money till date. Now let me know how to manage?

    • Gomer

      The burden with conscience now lies with them, not you. If they can take it with their conscience as if they are no longer bothered with not being responsible for repayment of borrowed money, then pity them as the Holy Spirit may have already departed from them.

      With a person like me who have spent significant years of my life trying to repay loans, I can’t imagine why others have the opposite character, opposite of me.

  4. jpaliskis

    Borrow money? It is a big question for  everyone: borrow money from bank or from a person? Bank will borrow with high interest ( up to 29%) .  I had almost same situation – borrowed from bank and paying till now 25% interest. They are big sharks ,but sometimes we don’t have a choice  (  I did very bad decision ).

    My friend borrow from me decent amount of money and promise to bring back in the end of month , already 3 months passed but he didn’t return yet. What to do? I don’t know. I need money to pay my bills and loan with 25% interest  but…( it was bad decision) .

    The solution:  don’t borrow and don’t lend. If you don’t have money (cash) don’t do any business…. Just wait for better time. 

    We have to learn  how to live without borrowing money from bank or person.

    • Gomer

      That’s what I realized. Let the customers scream when you do not have enough inventory in your store. “Hey, maybe you should close this store now. Everything that we ask, out of stock!”

      I have this other source of income which does not require a capital to earn. On the adjacent side of the pharmacy business, I have a internet cafe that receive encoding jobs, and usually it is me that’s doing the encoding and printing jobs. I will just work with it, save money from the income, so I can buy this pharmacy with the needed inventory.

      In most business loans, loan purpose is usually written as “For additional working capital”. That is if you can roll the capital 1,000 times per month at 40% profit—purchase and re-purchase of goods, but if not, don’t borrow at all. It can be a potential trap.

  5. Nate MC

    This was a good read. I firmly believe that cash is king, so people should only pay in cash. If they want to start a business, then cash. . . If they want something nice, then cash. I have seen too many people get into a cycle of (like you mentioned above) borrowing money for something, and then borrowing more money to pay back the original loan. 

    • Gomer

      Exactly. Some get to that point intentionally, some accidentally. But what is more important is, if you find yourself in that situation, get out from there. Find ways to get out from there. Then, learn from the mistake/s committed.

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