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For what purpose can one take loan?

There are no debt-free people these days. But the reality is that debt can disrupt a family. It is difficult to live life without taking a loan for that, you have to choose the right bank to buy the loan in a proper way..

In article's 

Borrowing can happen for two reasons.

Unexpected expenses – Sudden ill health of the earner, loss of job of the earner, emergency maintenance expenses, vehicle repairs etc. How to deal with this? We should have an emergency fund to handle these. Must have medical insurance and life insurance.

Anticipated expenses – Diwali, Pongal expenses, annual trips, child's further education, house purchase etc. How to deal with this? For these, we need to save money and invest in advance. Invest according to the objective. For short term goals invest in Fixed Deposits, Mutual Funds. For long-term goals invest in stock market oriented mutual funds.

So, by planning for unexpected and expected expenses we can handle without borrowing.

Also, loans can be classified as good debt and bad debt.


Good credit - an investment that will pay you back many times over in the future.

Bad credit – Bringing a big hole in your finances in the future

Examples of good credit include:


Buying a home - essential. Peace of Mind. There are government tax incentives. Too much money. Hard to buy together.

Starting a business - Multiplies money in the future, government tax incentives available.

When livelihood is questionable, a poor person can take loan for basic needs. When a business sinks into losses, a rich person can borrow money to revive it. A middle class can borrow money to buy non-luxury items for family necessities. For this to happen, the lender needs to trust your ability to repay the loan. Generally, a loan can be taken to buy/build another asset, to increase income. Nothing wrong..!


Post-secondary education – education is capital, the foundation for a good job and career in the future. There are tax benefits.

Examples of bad debt include


Tourism Loan – Tourism is not essential. You should travel with money. You can invest in Fixed Deposit Funds.

Loan for purchase of television, air conditioner - not essential. Must buy with money. You can invest in Fixed Deposit Funds.

Loan to invest in stock market – Investing in stock market can be bad at first. If you add money and do it with your own money, even if you lose money, there is no debt problem.


So, by planning, you can stay out of debt. If the situation is solved by taking a loan, you should buy only a good loan. Even that, as soon as possible, it is better to close it.

Peace be upon you, debt free man
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