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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