Take Out a Loan Today for a Great Cause – Make a Difference! Financial Freedom - 4

On your journey to financial freedom, you can also use loans to your advantage. How?

Many people may wonder if it is right to take a loan and achieve financial freedom. First, one should know the difference between an asset and a liability.

This is what we know. You are asking what new things you are going to say in this. Let us look at some types of assets and liabilities. Find out whether it comes under the category of assets or liabilities. We can also call a liability a debt.

First, tell us whether taking a loan from a bank is an asset or a liability. After asking this question, even a small child will know the answer to this question. How is a loan an asset? We have to repay it. In that case, you yourself say that a debt can definitely be a liability.

When does debt become an asset?

Suppose a person working in the United States gets a personal loan at 3% interest. If he is eligible for a loan of 20 thousand US dollars, he can get a maximum interest income of 7.5% when he takes that loan from a US bank and invests it in an Indian bank here. If 20,000 US dollars is equal to about 17 lakh rupees in our Indian currency today.

By doing this, he will get an interest of Rs. 12,000 per month. If we repay the 3% interest to the US bank, the interest we have to pay is 4,250 rupees. If we deposit this 4,250 rupees with the 12,000 rupees we received, we will get a profit of Rs. 7,750 per month. On a compound interest basis, we will get a profit of four lakh rupees in about five years. Despite the risk of a change in the dollar rate, getting an interest of Rs. 4 lakh will definitely be profitable for us.

The important thing here is that this Rs. 17 lakh is not our money. We have earned this Rs. 4 lakh by investing other people's money. We are getting profit here without any capital. There is no big risk in this transaction. The loan obtained in America becomes an asset. Sometimes, when the value of the Indian rupee decreases against the dollar, there is a possibility that the net interest profit we get decreases.

Through this, we can know that if we handle the loan carefully, we can know that the loan is our asset.

The richest people in India have also grown their companies by taking loans. From Ambani to Adani, who are considered the richest people in India, everyone has a debt of several thousand crores. An initial public offering (IPO) is a way to raise money from the public. A share issue is a way to collect funds from the public to expand the company. In this, instead of interest, if the company grows, it pays dividends. Many big companies in the world have taken loans from banks, met people and raised money through the stock market and have grown into big companies today.

Carefully handled debt becomes an asset..!

So carefully handled debt becomes an asset for us. Many of us have the idea that taking a loan is wrong. Although this thinking seems right to many, there is no alternative opinion that large companies are built on debt.

If you buy a car for business purposes and not for personal use, it is an asset. When you buy the same for personal purposes, it becomes a liability - a loan. Therefore, taking a loan for asset creation is definitely beneficial. But it is very important that taking a loan is a development-related matter. But today many people take a loan mostly to buy a mobile phone and go on a foreign trip. We do not get any income from this loan. We have to repay this loan from our salary. If we take such loans without planning, it can be dangerous for us.

How much can we borrow and invest is the second question of most people. A person's monthly salary can be up to 30% of the loan installment. A person's passive income can be up to 50% of the loan installment. 

Thus, by deducting expenses from income and taking a loan to help build assets, he can start investing to create assets.

Next to achieving financial independence, we need to calculate our net asset value just like we calculated our net income. In calculating net asset value, we need to evaluate all of a person’s assets. Generally, assets are divided into two categories: movable and immovable assets.

If it can be moved from one place to another, it is a movable asset. Vehicles like cars, gold, expensive items, bank deposits, company shares, bonds, mutual fund investments are all movable assets. House, agricultural land etc. are immovable assets. The value of all movable and immovable assets of a person should be found out.

After that, all types of liabilities should be calculated. All long and short-term debts generally come under liabilities.

The difference between the assets and liabilities calculated in this way is the net worth of a person. The net worth of a person changes every day. Therefore, it is good to calculate the value of a person's assets at sufficient intervals. The higher the value of the net worth, the more wealthy a person is.

Thus, as we have seen earlier, one should invest the money obtained by increasing one's income and create assets. The assets created in this way will give income again. The income thus generated is passive income. That income will be reinvested in assets on a cyclical basis and will generate additional income.

Therefore, asset creation plays an important role in achieving financial independence. We can create this asset through various types of investments. We can create assets by investing in various types of investments such as Employee Provident Fund Scheme, Bank Deposit, Debt Securities, Real Estate, Stock Investment, Post Office Savings Scheme, Wealthy Savings Scheme, Mutual Fund Investment.