Why people borrow…..

There is no research in India done on topics like why people borrow, or how people invest…but here is an attempt at guessing….

1. People borrow to buy assets : buying a car, a motorcycle, a house…..etc. requires sums of money that a person may not have, so borrowing becomes a must.

2. To pay for losses made: In equity markets, commodity markets, real estate, or wherever….etc. people borrow to trade, and when they make losses they need to borrow money to repay the losses.

3. To pay off a pressing loan – if the lender is a mafia don you might as well borrow from the bank and replace the goon…

4. To pay for medical expenses..- an emergency normally happens in case of medical needs. This could be a big expense and totally unexpected..

5. Living beyond one’s means: for whatever reasons people live beyond their means! so many people earning well (and knowing that they are lucky to be earning that amount) buy latest gadgets, cars, take vacations, family believes that they can travel only by taxi and air, ….when they borrow it is for living beyond their means.

Can this be avoided?

Of course 2, 3, 4 and 5 HAVE TO BE AVOIDED and can be avoided….how?

2: if you do not know how to trade, do not trade. Understand that it is not easy, but people do fall for such trading calls, till they lose their money. Some times all the money.

3: if you have a loan – see how did the loan arise….AND then solve THAT problem…whatever it is.

4. take medical insurance, adequately, you

 

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2 Responses to “Why people borrow…..”

  1. These reasons are very valid for people earning decent money in cities. But the main reason for borrowing in India is to meet day-to-day living expense. Go to any village and you will see it. Farmers borrow it with the hope of repaying after next harvest. Due to higher interest burden, they again have to borrow even if harvest is good. This cycle continues and usually ends in tragedy.

  2. Sir, seems you have not completed the post. Explanation to 4 in complete & 5 is missing. Request you to complete to same as we enjoy all your post a lot

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