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3 February, 09:35

Borrowing money is about using debt to make today and tomorrow more prosperous. With the result of that prosperity, you pay off the debt in the future. How certain of the future do you need to be to borrow money?

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  1. 3 February, 10:05
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    Based on creditworthiness analysis (dependent on income & expenditure, saving pattern) - compared with EMI

    Explanation:

    Money is borrowed to enhance future cash inflow / wealth; with cost of paying interest & repaying the loan later.

    So, loan repaying capacity must be verified as a pre-requisite to borrow loan. It is done as per 'credit worthiness' analysis of the borrower. The creditworthiness is ascertained based on borrower's income sources & composition. It also takes into consideration consumption, saving proportions of income. The relative comparison of savings with 'equated monthly instalment', that comprises both interest & principal amount : establishes certainty about repaying borrowed money.
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Home » Business » Borrowing money is about using debt to make today and tomorrow more prosperous. With the result of that prosperity, you pay off the debt in the future. How certain of the future do you need to be to borrow money?
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