Addiction to Borrow Money

Borrowing money is not evil or wrong. It gets wrong when we are addicted to it. It happens with some people that they are in the constant habit of borrowing things like pen, money, magazines, comics, etc. The problem arises when they forgot to return the borrowed items.

Being addicted to something implies that we have tried our best to leave a habit but are unable to leave it. It is like a person addicted to smoking. The body urges the person to smoke cigarette from time to time. Similarly if our mind urges us consistently  to borrow items or money from others then we are addicted to it.

The addiction to borrow money can be highly dangerous as explained below:-

1. We borrow money to fulfill our needs and expenses.

2. When the time for returning the money comes, then we borrow money from someone else and repay our previous loan.

3. The second loan is greater then the first loan since we need to pay the interest also.

4. Every time we keep on borrowing to meet some previous loans or needs. It is a continous process with the debt amount continuosly increasing.

5. Finally the debt amount becomes so big, that we are forced to default on the amount.

It is loss for the lender, and also a very big loss to our credibility. This is one the most common reasons for bad credit that we face now. Always ask yourself some questions before borrowing money.

Excess of anything is bad. So do borrow money when you need it, but do not make it a habit. It can ruin you and the lender too.

Why Banks Lend Money

Banks are established to do business. No bank is there that will be interested in doing charity work. Now lending money is a risky operation, since there is always the risk of money not coming back from the borrower. Then the main question arises that why do banks lend money?

The answer to this is that, banks do business by lending money at higher rates as compared to the interest rate they pay to the account holders. I will explain this point wise.

1. We go to bank to open a savings bank account. A saving bank account is one of the lowest interest accounts. So it is a form of bank borrowing the money from us at very low rates.

2. Now there are people who are in need of money and want it immediately, they go to the bank and ask for loans. It might be for any reason like personal loan, home and housing loan, car loan, etc.

3. The bank lend money to these borrowers at a higher rate then it is paying to the saving account holders.

4. The difference in interest is the earning benefit for the bank. 

Suppose that a bank pays an interest of 4% per annum on Saving bank account. It charges an interest rate of 14% on car loans. So an amount of $50000 deposited in the saving bank account will become $52000, so a benefit of $2000 for the saving bank account holder.

On the other hand the bank lends the same money to a borrower for car loan at 14%, so the bank receives $57000 at the end of year. Therefore the bank profited by $7000 - $2000 = $5000. So we see that bank is earning without investing anything. But the actual case is that the bank bears the risk of the borrower defaulting on the loan. It is similar to the strategy of making money by taking a loan.

All the banks that lend money usually perform thorough background check of the borrowers credit and reputation in the market, so as to ensure that there money will be safe.

Now one of my friends asked me that, why is it that the banks give loans to those who already have money, and not to those who do not? The answer to this question is that the banks need to make sure that there money is safe. If a person does not have money to fulfill his means now, then there is a high chance that he will not be able to repay it later. On the other hand those who have money have saved it and know how to take care of money.

There are many other factors like the past credit records, reasons for borrowing money, is the person borrowing for investing or does he want to take care of his expenses.

Cheers,
Amit

Try to Borrow Money Privately

Everyone among us borrow money some time or the other. It might be asking money from parents, or borrowing money from friends or it might be via some bank or other lenders. Asking for some money is not a point of concern till we are dealing with our near ones.

When we take a loan from the open market, like banks, or financiers, etc, then our credit comes into picture. Moreover the market becomes aware of the fact that we have taken a loan. It implies that we do not have sufficient amount of money to sustain our current work.

This information could be misused by many people who do not like us, or just want to take advantage of the situation. Just imagine the scenario that you are doing some business and you applied for some loan from a financiers. If the dealing is not done privately and others came to know about this, then they would know that you are facing a crunch of liquidity right now.

It happens that people who have enemity with us or do not like the fact that we are growing, try to create new problems for our business and other parts of life. they are aware of the fact that we are short of money, so it is the right time to strike.

Giving away your weak points to others could result in your loss. So make sure to borrow money privately. This will always be helpful in the long run.

Does Wikipedia Borrow Money

Wikipedia is one of the most known sites in the world. It contains a plethora of information about whatever topic you can think of. I do refer it for almost everything. But recently I saw a message appearing in every page of Wikipedia from Jimmy Wales who is the founder of the site.

The message at that site requests everyone interested in supporting Wiki, to donate some money to them. I saw the same message appearing last year also. The target last year kept by them was $6 Million. Now that's a huge amount, and they were able to manage it.

The best part with donation is that you do borrow money from people, but you do not have to return them back. It's like a free will to support some purpose or cause.

Personally I believe that the effort from Jimmy to keep the site ad free is very good, but still they need money to maintain the site, servers, people for maintainability, etc. Everything asks for money, so they come up with an innovative way to ask for donation from its readers.

Actually its benefit for readers also as they get the content in the site ad free and clear, its more like a business where you can take whatever you want, but you are free to pay or not.

I liked this way of making money via donation, as this is very genuine and is the most humblest form of surviving in this greedy world. If you take a loan or borrow money then you have to pay back, but here everything is yours. Smart & simple.

Borrow Money from Friends

Friends are our best companions of all times. They are with us in good and bad times. Friends can be very helpful in case you need to borrow some money. You need not do any reputation building, since they already know your nature and understand you.

More the number of good friends, the better it is for you. In-fact the quality of friend can be tested by the fact that he responds to your call for lending money to you.

Some simple steps that might be helpful in borrowing money from friends are:-

1. Tell them your need for money.
2. Inform them about the purpose of borrowing money. This is essential since here everything is on trust.
3. Ask them for the amount they can contribute.
4. If they contribute the entire amount, then it is good for you, else ask for the remaining amount from other friends.
5. Inform them the date by which you plan to return the money. This helps in ensuring the friends that their money is not lost and will come back.
6. Maintain a healthy relationship with all your friends, this ensures further borrowing of money, or extension of deadline for returning the money.

The basic advantage is that no paperwork is required, since the money lending and borrowing is done on trust and your personal reputation. Make sure to return the amount by the given end date, so as to maintain the trust of your friends.

Borrow Money from Parents

The safest, easiest and best way is to borrow money from your parents. They are our best helpers always. You don't even need to build any extra reputation building with them, since it's already built. Make sure that you are able to convince them about your need for money, and I am sure they will understand.

Asking for money is difficult from a stranger, but with parents the case is a lot more simpler. Follow the steps mentioned below to make your parents lend you money.

1. Inform them about the product or service that you are willing to purchase.
2. Explain your parents some benefits about that product or service for your business or personal usage.
3. Tell them about the price it will cost, and how much you have to invest from your side.
4. Ask them for the remaining amount, as you have tried all other options.
5. Sound confident, as they would be convinced only if you yourself are convinced.

The best part of borrowing from your parents is that you are not supposed to return it back, except when stated clearly by the parents. If they feel that you are utilizing their money for the right purpose, then they will definitely support you.

Questions to be asked before Borrowing

When you borrow money, then it implies that you do not have enough money to pay for that commodity or service. It happens at times that we need something very urgently, and we don't have ample amount of money to get it. It's a mean world and nothing is for free. If you borrow money then you have to pay interest on it. If you are forced to ask for a loan, then ask yourself a few questions.

• Do you really need to borrow?
• Do you really need that product or service urgently, or could it be postponed until you have the money yourself?
• If you need the product urgently, then is there any way you can do without borrowing money from others?
• Will you be able to repay the loan in given duration?
• If finally the loan cannot be avoided, then are you getting the best deal from your lender? (i.e the lowest interest rate, and maximum duration to repay the loan)
• What are the other options for lenders available to you?(Potential lenders could be:- Bank, friends, local lenders, etc.)

Taking a loan means that you have to pay interest on it, so eventually you end up paying more then the amount required to buy that commodity. So do borrow money, but only when it is essentially required.

Make Money by Taking a Loan

Money making from a loan is a practice followed by many lenders in their local markets. The earnings are real good. Only you need to have some reputation in the market, or just people must know that you are a lender.

Everyone need money at some time or the another. Their are circumstance at which a person is tempted or forced to borrow money from someone. But this force to borrow money can be utilized to make some bucks.

Some time back I discussed about the case about my home maid, where she had borrowed money from a local lender at very high interest, just because of the fact that she is illiterate and don't want to get into the mess of banks.

This thing has many positive outcomes for the lender. The lender can utilize the reluctance of the money borrower to his advantage, by taking a loan at small interest and lending it at a much higher rate.

The steps required for money making from loan are:-

1. Ensure that there is a local market for lending in your area, i.e. some people prefer to take money from local lenders as compared to banks or other authorized lenders.
2. Do some advertisement for your business as a lender. This will attract the potential customers in your area.
3. Whenever some one comes to you for a loan, if you have the amount with you, then you can lend him at your desired rate of interest. Usually this rate is negotiable, and depends upon the bargaining power of both sides.
4. If you do not have the money with you, ask for a processing time for a day or two, and apply for a loan from a bank or another source from where you can borrow money at much lesser rate of interest.
5. The target is to borrow the money at a lower interest and lend it at a higher interest, thereby making a source of income.

This is a very big business today, local lenders try to keep their customers with them. And the customers also wish to stay with local lenders as they are scared of the official paperwork and mess.

Borrow Money Letter

Writing a letter to someone for borrowing money is an art in itself. The aim is to convince the person on many grounds and make the person lend the money to you. This is more difficult when you have bad credits associated with you.

Making a person shell out money for your usage is difficult. A face to face communication requires a very high level of communication and convincing skills, so many times we write a letter to the lender for some money.

Advantage of writing letter for borrowing money
The advantage is that we get ample time to think over the lines and subject. We can make the letter look more genuine. On the contrary a face to face communication is a difficult task and requires good convincing skills. I have seen many people stammer in verbal communication while asking for money, making them look uncertain about themselves. It creates a bad impression on the lender, while a letter can make a great impression if properly written.

Key points for Borrowing Money Letter

• State the reason that why you need money. This helps in creating the impression to the lender that your requirement is genuine and that you really need it.
• State the amount you need.
• Mention that you are in desperate need of money, else you would not have worried the lender.
• State the time by which you plan to return the money back to the lender. This is important since everyone wants the guarantee for his money coming back. This deadline will make an impression that you will repay the loan as soon you have the money back with you.
• Use a neat page for writing the letter, and avoid any misspellings or grammatical mistakes.
• Don't use extra words or vague reasons for your requirements, just keep the letter to the point and simple. The lender must be convinced that you need the money desperately and that you will surely pay him back as soon as possible.

I will later add sample letters for borrowing money, so that you can get an idea about it. Always pay back whenever you borrow or else it breaks the lenders trust, and he may not lend you money next time.

No one likes to borrow money

Money is one of the biggest necessity of our daily lives. We are forced to borrow money at crucial times. The biggest reality is that, no one of us likes to borrow money, but circumstances forces us to do so.

There are scenarios which require a splurge of money or instantaneous money which makes us ask for loans from friends, banks, lenders, etc.

There are other issues which come uninvited like an accident, or some decease which require a huge amount of money for treatment. We all love our near ones, and are left with no other option then to borrow money from some one.

Recently my home maid get her daughter married. She took a loan from a local lender to make sure that no issues come in her daughter's marriage. Though the interest rate she is paying is very high.

When I came to know about it, I informed her that the local lender is cheating by asking for such a high rate of interest. I advised her to check with any bank for a much better rate of interest. She replied that she is uneducated and do not want to get in the paper work mess of banks. She is happy with the high rate of interest and will pay it somehow.

That made me realize that the person's in our society are also lending money at such high rates due to illiteracy. I suppose that the banks should make their system more simpler, so that they are people's first choice when it comes to borrowing money.

People may borrow money when they want to start new business. Such scenarios are very risky, since if the business flops the so does the investment done on it. And if the amount invested is a loan, then you are supposed to pay it back anyhow. Situations like these can cause bad credits.

There could be infinite reasons for borrowing money like

• Business setup
• Crunch of liquidity in business
• Children education
• Accident
• Some disease
• Buying a car
• Daughter's marriage
• etc.

The list can be very long, but the basic factor remains the same that asking for a loan or borrowing money is done in case of crucial requirements, and in such cases getting a lender quick and fast is very essential.