You have never calculated the actual impact cost of loans which you take from BANKS, NBFCs or individuals.Just read this article and do your homework.
POWER OF COMPUNDING IN COMMERCIAL WORLD.
All money lenders are fat and prosperous . Banks, NBFCs gives high salaries and perks to their staff. They maintain best and most modern offices even after NPA s continue to flourish.
1) Banks have crashed in USA and Euro zone . American dollar is not worth the paper on which it is printed., But still due to power of compounding in money lending business the majority of the public end up subsidizing it.
2) It takes ABOUT one second to count one FIVE HUNDRED DOLLAR or EURO currency note. To count ONE TRILLION notes will take 63.5 years. So imagine the flood of printed currency in hundreds of trillions in EURO or DOLLARS circulating all over world.
3) Just paper in form of DOLLARS , EUROS or US SECURTIES is buying goods and services all over the world. That is why US or Europe is prosperous . But things are slowly changing and that is the only reason for growth of gold prices.
4) What you do and how you subsidize this system .You take bank loan for business or industry. But you never calculate its total cost on your personal inputs and profits. Let US take actual example-
All told the normal cost of bank loan is TWO PERCENT per month compounded. It is much more if you take any financial assistance from NBFC or private financers. How much you repay for a normal bank loan -
1) After one year twenty seven percent.
2) After ten years you have paid 14,000/= for every one thousand taken.
3) After twenty years you pay two lacs for every one thousand taken.
4) After thirty years you pay 260 lacs for every one thousand taken.
5) After forty years you have to pay 3600 lacs for every one thousand taken.
6) After fifty years you have paid 5000 lacs for every one thousand taken.
You do not understand its impact because the interest is paid regularly from your profits.
Now just think in reverse . If you can get TWO PERCENT profit per month on your capital than your every one thousand must become FIVE THOUSAND LACS in fifty years. It does not happen because you toil to pay interest, taxes, wages, repairs, depreciation first from your profits. The business or industry in some cases have appreciated but it is due to inflation only and not at all in above proportion.
Multinational companies listed on stock markets do get such profits regularly even after meeting all expanses year after year due to proper planning.
As an individual you can get such profits from share markets if you do your math properly and trade with proper planning and regularity.
5) For calculations the interest cost is taken two percent per month , it may be few decimal points lower due to your proper money management. Still due to compounding your costs for interest and invisibles related to it becomes ten times of your original borrowing in ten years and further ten times there on every ten years.
