Hello,

Welcome to Paisa Monk → No non-sense finance content for middle class Indians!

This is the article #1. If you’ve missed the intro, read it here.

Today, let’s talk about debts(loans)- the middle class nightmare (really?).

99% suggestions you see from instagram influencers or on internet are around clearing the loans faster to achieve peace of mind.

Today, let’s put on the monk and discuss whether we really need to clear the loans faster?

Before you take that decision, you need to understand good loan vs bad loan.

A loan in plain simple terms is that you take ‘x’ amount of money from someone (bank/financier) with a return condition that you’ll pay ‘y’ amount as EMI at z% interest rate.

Now, any normal loan under the sun operates in this model itself (unless you’ve made a different deal from your borrower)

Now, there are different types of loans in India - home loans, personal loans, auto loans (Cars/bike), business loans, education loans and the list goes on..

What is a good debt?

If you think a good debt is the loan with lowest interest rate, you’re absolutely WRONG!