How a personal financial misstep can affect your investment?

Define short-term and long-term financial objectives before taking a loan, keep a reserve to handle unforeseen expenses without relying solely on credit

In today’s interconnected financial ecosystem, a poor decision can unsettle your present, and future plans.The ripple effects echo in your credit scores, and your future loan eligibility, showing how well connected and delicately balanced most household finances are.  "One financial misstep of an individual is not an isolated event. Instead, it sets off a chain of consequences that can take years to undo, highlighting the importance of careful financial planning and responsible money management. Credit risk isn’t just about individual borrowers but it’s about the strength of the entire financial plan," said Rishabh Goel, co-founder & CEO, Credgenics. 

  Understanding how personal financial misstep can affect you

 

Imagine an individual taking a high-interest personal loan to fund a lavish wedding or on purchase of consumer goods. If his or her income fails to grow as anticipated or an unforeseen expense arises, such as a medical emergency, they may struggle to repay the loan. This could lead to defaults, impacting creditworthiness and difficulty in getting a loan in future.

 

“While access to credit empowers salaried professionals to fulfill their aspirations, a single financial misstep, such as overspending or missing repayments, can trigger a chain reaction, impacting credit scores and future loan eligibility. Responsible borrowing and timely repayments ensure financial stability, preventing short-term celebrations from turning into long-term financial burdens,” said Kaushik Chatterjee, CEO, lendingplate (personal loan platform).

 

Impact of wrong financial investment

 

Risk of losses: Investing too heavily in high-risk assets like direct equities without proper diversification can lead to significant losses if the market declines. This can erode the value of your portfolio and impact your ability to meet financial goals.

 

Chain reaction: If you have invested in other high-risk assets, a downturn in one can trigger a broader decline across your portfolio.

 

Points to keep in mind while doing financial planning?

 

Set clear financial goals: Define short-term and long-term financial objectives before taking a loan.

 

Borrow wisely: Take loans only for essential needs and ensure affordability within your income.

  Create a budget: Plan monthly expenses to manage EMIs without straining finances.

 

Prioritise timely repayments: Avoid late payments to maintain a strong credit score and future loan eligibility.

 

Build an emergency fund: Keep a reserve to handle unforeseen expenses without relying solely on credit.

 

Understand loan terms: Read the fine print, including interest rates, repayment tenure, and hidden charges.

 

Monitor your financial health: Regularly review your financial commitments and adjust spending accordingly.How a personal financial misstep can affect your investment?