The Power of Loans: Examples of Success
There have been instances where taking a loan has helped individuals achieve great success. For instance, Kalyanaraman, the founder of Kalyan Jewellers, needed 75 lakhs to start his business but only had 25 lakhs.Can You Become Rich with a Loan?
He took a loan of 50 lakhs from the bank and turned it into a company worth 17,000 crores. Similarly, Rohit Prasad Maravi, a driver earning a salary of 5,000 rupees, applied for a loan under the Pradhan Mantri Mudra Yojana and used it to buy a taxi. By paying off the loan installment, he was able to save 17,000 rupees every month.
The Difference Between Good and Bad Debt
While taking a loan can lead to financial improvement, it’s crucial to understand the difference between good and bad debt. Bad debt refers to loans that do not generate income or create assets.
Examples include car loans used for personal purposes or loans taken to buy luxury items like iPhones. On the other hand, good debt is a loan used to create assets or generate income.
This includes loans for buying property, starting a business, investing in precious metals, or purchasing vehicles for rental purposes.
Where to Invest and When to Avoid Loans
If you’re considering taking a loan, it’s important to assess your risk appetite and determine whether you can handle the associated stress. Additionally, avoid taking loans for high-risk businesses like stock market trading, especially if you lack knowledge in that area.
It’s also advisable to avoid loans for businesses with high competition or ones in which big players already exist, as the chances of success may be lower. Lastly, it’s recommended to have health insurance and term insurance to cover unexpected medical expenses instead of taking a loan for hospital bills.
Key Points to Consider Before Taking a Loan
Before taking a loan, compare interest rates to ensure you’re getting the best deal. Even a small difference in interest rates can accumulate to significant amounts in the long run.
Additionally, take only the amount of loan you need and not more, as compounding interest can make even small amounts grow substantially. Finally, aim to secure loans at the lowest interest rate possible and subscribe to the channel for more informative content.