Personal loans and credit cards are all such products that help a person borrow and spend on certain things that they need immediately. To drive the growth towards consumerism, companies are coming up with a variety of products where that help customers buy the things they need by facilitating their credit options.
However, using these products excessively builds a habit of borrowing, which leads to debt accumulation; a person needs to pay that debt each month, which again leads to debt-fueled spending.
In this blog, we will look at some of the psychological aspects that debt brings into the life of a person and how one deals with that.
- Balancing Financial Freedom and Debt Anxiety
One of the most intriguing parts of borrowing is that people sometimes do it to make their lives financially stable. There are people out there who take debt to build assets, such as buying a property or building a business. They take loans to keep the prospect that it will help them build a passive source of income.
However, getting too much leveraged in debt also causes anxiety, and if things don’t go according to the plan, then the debt repayment process can get prolonged, and one can face the trouble of paying off the debt throughout one’s career, which can lead to debt anxiety.
Once a person gets worried as they can’t manage the debt, it deteriorates their health as they deal with financial trouble. It makes the repayment process more troublesome as they can’t manage the extra amount that they can finance for debt repayment.
- The Lure of Immediate Gratification
The second aspect of borrowing is overspending to meet our dopamine level. When we buy something new, at that moment, we feel good about buying that stuff, and the more items we buy, the more we can experience that “feel good” feeling.
There are now companies that promote this habit, like providing BNPL (Buy Now Pay Later) options, which makes spending much easier, and through that, one can make purchases and use borrowing as their primary option.
However, this need for instant gratification can cause long-term consequences, and through that, one can find oneself in deep peril where one needs to clear all these existing debts through time.
- Emotional Purchases
Certain borrowings can happen due to emotional purchases. A person can have the desire to buy a new home or a car, and based on that, one can borrow a certain amount of funds, and through that, they can realize their dream.
A person can consult a DSA partner, and through them, they can check which banks are offering lower interest on the loan amount. However, fewer emotional purchases can be justified. Still, once a person gets into the rabbit hole, the unprecedented options of debt can lead to a debt trap, which can jeopardize long-term financial goals.
- The FOMO Driven Marketing By Companies
One of the things which can trigger a fear impulse is the FOMO marketing. One of the most important things that one can observe is how the product companies bring flash sales as they drop prices and tell the customers that the order will end within an hour.
It creates a sense of urgency, and one fears the problem that they will miss out on the latest products. It is called FOMO-driven marketing. Here, a company plays with the basic psychological impulse of a person where by tricking it by paralyzing the critical thinking ability, and one suddenly feels the need to choose between two options and make a purchase decision.
This psychological pressure can lead to impulsive borrowing, and one needs to figure out ways through which they can pay those debts that lead to financial constraints.
- Usage of Credit Score and its Impact On Self-Esteem
A credit score is such a thing that plays an important role in personal finance, and one sometimes feels that a good credit score is not only beneficial for one’s credit history but also considers it to hold self-esteem.
The psychological aspect of this is that it gives a sense of worth to the individual, and through that, one can take the chance to increase the credit score, which signals financial adequacy in society.
Thus, one needs to understand this financial aspect of borrowing and how one can prevent oneself from overconsumption and avoid borrowing for daily lifestyle needs and requirements.
