Taking loans to cover volatile income creates debt trap for many
Taking loans to cover volatile income creates a debt trap for many It’s always suggested to avoid taking loans for consumption or for buying depreciable luxury items. Taking a loan is beneficial when it enhances the income generation capacity – like a loan to enhance production capacity or education loan to enhance employability, or to acquire appreciable fixed assets that require large investments – like a home loan that also provides the opportunity to move to one’s own house and save on rent payout. Lack of regular income However, without having a fixed monthly income, many Indians find no option, but to borrow as consumption expenditure more or less remains the same even during the months of no or very low income. “Since many Indians don’t earn regularly, they end up borrowing expensively,” said Abhinav Nayar, CEO at Mool, adding, “While most Indians might suffer from income volatility, their consumption expenditure is more regular, suggesting that there is already nascent consum
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