The Founder and Chief Executive Officer of Zerodha, Nithin Kamath, took to X to highlight the need for a good credit usage strategy. While credit is one of the most useful tools, it can become a rapidly tightening rope as well.
Kamath addressed those who find themselves in debt already and suggested prioritising paying off outstanding payments and debts first.
"The lowest hanging fruit and the most bang for your buck thing you can do with your personal finances is to pay off all your high-interest loans, including credit cards. If you are in debt, the psychological effects will show everywhere from your personal life to your workplace. Ensuring you get out of debt has to be the first thing you do, even before you save and invest," Kamath wrote.
After the pandemic, there's been a big increase in personal loans and credit card borrowings. The good side of this is the deepening of credit, but the bad side is some people seem to have borrowed too much or borrowed despite not being able to afford it. A lot of these are small… pic.twitter.com/tMFPTb1m8O
The Zerodha founder also reposted his post from 2021. "The worst times in my life have been when I owed money for spending it on things I didn't really need. In a world where everyone is trying to lend, the first lesson of personal finance is to borrow only when you are sure that it can earn a return more than the cost of money," it said.
Kamath also used data to show the credit behaviour of the country. Simple negligence like unpaid hefty interest and fines on credit cards can tip good credit into the vicious circle of debt. This can especially turn ugly if there is more credit added to unpaid credit.
A report from the credit bureau CRIF sheds some light on this situation. As of September 2024, the total outstanding personal loans in India stood at Rs 13.7 lakh crore. Of this, public sector banks hold the largest share, about 38%, followed by private banks with 33%, and non-banking financial companies with around 24%, the Zerodha daily mail states citing the report.
The founder has not held back from talking about debt and credit in the past, especially while talking about his initial days in trading as well.
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