Lenders and borrowers during inflation

[Gozie51]

👉👉Observation: Comparing the two men with the lenders profit when loan was given, if in just 9 months the purchasing price of man B is close to the total amount payed back (purchasing price + interest) by man A, what happens at the end of the 16 months if inflation keep increasing. If the lender decide to buy a tricycle after man A had finish paying his money. He will end up adding to the money before he can purchase one. When lending money to man A, the lender believes he’s making a profit of #500,000 but this doesn’t worth it anymore within that 16 months as inflation keeps increasing.

If you looking into Nigeria inflation proper , you see it goes in circle and never affect or stop at just one man or person. This is because of the Nigerian situation and government. The Nigerian system is the type that is almost not regulated in every aspect of the sector. It is not a system of majorly or dominated by working class but it is more of business and artisans so this aspect of the economy is not highly regulated and things are not done in more organized way like in working class where salaries come at a point and fixed but talking about the transport sector where the loan analysis was made, the times you used for the loans to be repeated may not be exhausted before they are even repaid because the tricycle operator may increase his price and charge abysmally to the detriment of the passengers and no body will question that, there are no price control. At night and rush hours are worst of for price increase, raining days are all target times for such unusual increase and this is why I said it comes in a cycle and the loan collector those not really bother about how much duration he is making repayment. So it may not be a smooth scenario for such analysis. Example, prices during the days for same route varies and individuals control the price themselves except for few government transport system that is far below enough.

[1715479046]

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[Adbitco]

It all depends most at times.. though the years difference isn't that much but I can not be when valuing an asset like tricycle or other similar scenario.
Do you remembered that buying 40fit container in 2019 was bit higher than buying it 2020?

Now I will tell you, in 2019 business seems to be normal and everyone on a regular daily activities whereby purchasing 40fit at 390k was much higher because in 2020 everyone thought the world is over and never know where they are heading to sad news every nation kept many heart bleeding due fear of death leading people selling their properties at a cheap rate while others donates their money to poor and many more. At then I was to price same 40fit container and I was told to purchase it at 150k which is much more cheaper.

I believe Inflation rate is higher than before but not in all items.
It mostly common in food stuff and to those under loaning, maybe importer exporter due to dollar conversion rates.

[Smitty Werben Man Jensen]

Well it's applicable on the normal circumstances but when the inflation rate increases than the expected rate then the interest rate of the loan may also be changed by the bank in the middle so the borrower has to pay more than what he has been doing but the income of the person may not be higher as same as the inflation rate hike.

It can be said that the loan interest rate is flexible depending on the conditions,
I think borrowers need to consider because such a policy would certainly be burdensome,
with increasing loan interest in the midst of inflationary conditions it will be difficult

[jrrsparkles]

Well it's applicable on the normal circumstances but when the inflation rate increases than the expected rate then the interest rate of the loan may also be changed by the bank in the middle so the borrower has to pay more than what he has been doing but the income of the person may not be higher as same as the inflation rate hike.

It can be said that the loan interest rate is flexible depending on the conditions,
I think borrowers need to consider because such a policy would certainly be burdensome,
with increasing loan interest in the midst of inflationary conditions it will be difficult

Most of them don't even read the terms and policies of loan before signing the documents including myself because we are in a hurry so all we do is just make hundred signature along with valid collateral to get the liquid cash in case of emergency which is used positively by the banking and financial institutions to make more money at any situations.

[el kaka22]

Inflation is not something that we could 100% trust on every time. Yes, we had a huge one so far, and yes if you took out a loan before that, you got it for cheap and then you start to pay it off back and by the time you finish it, you made a profit by a lot, and I mean a huge amount of money. But, lending and borrowing has always been like this in the long run.

Like in the USA (which is a huge economy and rarely gets a huge inflation compared to other nations) you could buy a house for 20-year loan, which means that you will pay a lot, like get 1 million and pay 2-2.5 million back, that’s a lot right? Well, in 20 years that house will worth 5x that, and you could make a profit just by renting it as well, so you are doubling your profit that way.

[uneng]

That is why you should avoid lending fiat currency for profit. If you want to lend it's better to use bitcoin instead, because on long term you don't have to worry about losing purchasing power. Lending bitcoin guarantees you profit in two different fronts: interest income and btc rising price.

On the other hand, when being the borrower, I'm not sure if the situation explained on this thread is an interesting one. Banks always make sure they aren't going to lose money, so you can expect in inflationary scenarios you are going to pay bitter interest rates to them to compensate the weakness of the local currency.

I have for myself that banks' loans must be avoided at all costs.

[TimeTeller]

That is why you should avoid lending fiat currency for profit. If you want to lend it's better to use bitcoin instead, because on long term you don't have to worry about losing purchasing power. Lending bitcoin guarantees you profit in two different fronts: interest income and btc rising price.

On the other hand, when being the borrower, I'm not sure if the situation explained on this thread is an interesting one. Banks always make sure they aren't going to lose money, so you can expect in inflationary scenarios you are going to pay bitter interest rates to them to compensate the weakness of the local currency.

I have for myself that banks' loans must be avoided at all costs.

But some are taking the route because they have limited or no more options to get money.
So whatever is presented to them as opportunity to loan money, they will grab it.
But as much as possible, borrow money if you badly need it and not just because you want it.
You can't avoid the inflation rate and other financial downturn so better limit your borrowing activity to any of these financial institutions.

[stomachgrowls]

Borrowing money during inflation the startup of business is not bad idea but it is based on our own understanding that made us to think that someone who borrowed money or something else during inflation is in negative part. I believe that anyone who summoned the courage to borrow money from anywhere during flexion knows the alternative to pay back the money because I believe that everything is based on plan and strategies

Whenever you do consider out on taking up some loan for some investment or businesses whether you are planning about those inflation thing then i would say that it wont really be that much relevant.

You wouldnt really care about these stuffs if you do able to sustain yourself because you are earning something from other sources.For Lenders then it would be understandable but for those borrowers

then as long those amounts been put up into something which could make you sustain then i dont really see anything wrong with it or issues as long you do know on what
you are doing.

[Oceat]

Borrowing money during inflation the startup of business is not bad idea but it is based on our own understanding that made us to think that someone who borrowed money or something else during inflation is in negative part. I believe that anyone who summoned the courage to borrow money from anywhere during flexion knows the alternative to pay back the money because I believe that everything is based on plan and strategies

Whenever you do consider out on taking up some loan for some investment or businesses whether you are planning about those inflation thing then i would say that it wont really be that much relevant.

You wouldnt really care about these stuffs if you do able to sustain yourself because you are earning something from other sources.For Lenders then it would be understandable but for those borrowers

then as long those amounts been put up into something which could make you sustain then i dont really see anything wrong with it or issues as long you do know on what
you are doing.

And that's the time when the question arises whether they could sustain their income or not because lending or borrowing something is just a start-up but never gonna guarantee that someone would be earning right away after they borrow something. I might reconsider their decision once they have a different business whose actually giving them some income rather than relying on something that doesn't give anything yet. Inflation has nothing to do with it – it's just the same when the time they have to pay for it.

[LastKiss]

~snip~

👉👉Conclusion: People with good and profitable businesses can borrow money to boost their business during inflation. They will always be at the gaining side if the money is utilized well.

Once again if everyone has a good and profitable business then borrowing money is not a problem but people who struggle to even get some profit from their business will have trouble paying their debt. Just borrow money when you have a plan on how to pay your debt when the times come since not everyone feels easy to pay their debt even when they have a job.

[virasisog]

~snip~

👉👉Conclusion: People with good and profitable businesses can borrow money to boost their business during inflation. They will always be on the gaining side if the money is utilized well.

Once again if everyone has a good and profitable business then borrowing money is not a problem but people who struggle to even get some profit from their business will have trouble paying their debt. Just borrow money when you have a plan on how to pay your debt when the times come since not everyone feels easy to pay their debt even when they have a job.

The usage of borrowed money is situational but the repayment will depend on how wisely the borrower handled and managed it. Repayment would be hard for those who used it for survival during this inflation crisis but will be easy for those who took advantage of the inflation to grow the money. It all depends on wise handling.

[South Park]

It's depends on how much the lenders ask the interest, if he's ask the interest that greater than the inflation, the lenders will take the benefit. I don't think the lenders are stupid and not knowing about how big is the inflation percentage, maybe they're just an average Joe who started to lend their money e.g. from your friend, neighbor etc. If you borrow money from banks, they will ask you around 10% interest per year which is very high.

I think the same, lenders are taking a risk and as such they need to be compensated, so it is a mistake to think that there can be many instances in which they can be outsmarted, if the inflation keeps increasing the only thing they have to do is to raise their interest rates as well to get their money back and more, so while what the OP says may seem to make sense on theory I think on practice it is way more difficult to try to do something like this and not lose even more money in the process.

[Hamphser]

~snip~

👉👉Conclusion: People with good and profitable businesses can borrow money to boost their business during inflation. They will always be on the gaining side if the money is utilized well.

Once again if everyone has a good and profitable business then borrowing money is not a problem but people who struggle to even get some profit from their business will have trouble paying their debt. Just borrow money when you have a plan on how to pay your debt when the times come since not everyone feels easy to pay their debt even when they have a job.

The usage of borrowed money is situational but the repayment will depend on how wisely the borrower handled and managed it. Repayment would be hard for those who used it for survival during this inflation crisis but will be easy for those who took advantage of the inflation to grow the money. It all depends on wise handling.

Depends on where those funds or borrowed money had been applied whether it would be used for some expenses and might be used up on investment or business which it would really be identifiable on whose the one

would able to repay those debts or loan afterwards and this is why you should really be that sensible when it comes into these actions because it would really be putting you in big trouble if you cant repay those loans or borrowed money in certain time.Its understandable that inflation do really hits hard into us specially into those earners which it is really just enough on daily living or needs.
This is indeed very situational or does depend on how someone would be using up borrowed money.

[crzy]

~snip~

👉👉Conclusion: People with good and profitable businesses can borrow money to boost their business during inflation. They will always be at the gaining side if the money is utilized well.

Once again if everyone has a good and profitable business then borrowing money is not a problem but people who struggle to even get some profit from their business will have trouble paying their debt. Just borrow money when you have a plan on how to pay your debt when the times come since not everyone feels easy to pay their debt even when they have a job.

Borrowing money to expand your business is always a good idea but I agree on the situation where the business is no longer profitable and experienced a lot of problems already. Though having that loans can also save the business slowly, we should not expect too much money from our business but of course we should always do our best because we do business to make money, and the purpose of loan is to help you sustain the business. Inflation might be one of the problem but then again, it will still depend on your strategy.

[Captain Corporate]

A friend of mine did this basically. He had 200k, and took out a 500k loan and bought a 700k house, and I think he did a wonderful job. Why? Because the inflation in our nation is higher than savings interest that they give us so thats useless investment, and the loan interests are low as well which means that by the time he pays it back, he would have spent another 500k, meaning he would pay it back 1 million and 200k was the initial so 1.2 million for the house, but by the time its over the house will probably be 5+ million. I know its not like that in other nations and prices do not increase that drastically in 10 years for you, but in Turkey its like that, house prices double in just a few years.

[Wexnident]

This is only the case if you borrowed before the inflation. Lenders naturally increase the interest rate of their loans as inflation rises, and if you were to borrow at the wrong moment you may end up paying more rather than paying less. So I guess the correct thing here is borrowers (who already have loans) before high inflation hits profit by paying less, while lenders during high inflation increase their inflation rates and therefore profit if it settles down.

Honestly wouldn't consider borrowing money if possible. I don't think it's that big of a business opportunity if you were required to get a big loan to even start it.

[Kakmakr]

Well inflation can be good and bad for both parties.... depending on what happens with inflation.... because governments adjust the interest rates.. based on the inflation. So there are a balance mechanism for both parties.... but there are also counter measures to protect both, like fixed interest rates.

The person taking the loan always lose out in the end, no matter what happens... because they have to pay the interest on those loans. Rich people pay cash.... they do not pay interest on loans, so they score the most. 

[odunybiz]

Well it's applicable on the normal circumstances but when the inflation rate increases than the expected rate then the interest rate of the loan may also be changed by the bank in the middle so the borrower has to pay more than what he has been doing

I doubt this because agreement had already be made. Banks deal majorly with agreement. That is why more lending organization put a high rate on interest this day because of the effects of inflation.

[RealMalatesta]

Well it's applicable on the normal circumstances but when the inflation rate increases than the expected rate then the interest rate of the loan may also be changed by the bank in the middle so the borrower has to pay more than what he has been doing but the income of the person may not be higher as same as the inflation rate hike.

It can be said that the loan interest rate is flexible depending on the conditions,
I think borrowers need to consider because such a policy would certainly be burdensome,
with increasing loan interest in the midst of inflationary conditions it will be difficult

That's in only some nations. In my nation for example you can be a person with amazing credit or could be someone with a terrible one, you either get a loan or you do not get a loan but your rate doesn't change. If you get a loan then me and the richest person in our nation both pay the same rate.

It means it's not flexible and that is done because we do not want to cause any drift between people by allowing already rich people to get cheap loans, and people who truly need it to survive to pay loan shark amounts. That's our nation though, we may not be like others, I know USA for example has rates changing based on the person and how they have paid their debt so far.

[bestcoins1]

When inflation occurs, of course there are many unexpected things, and in my opinion it is natural if there are many offers for borrowing, purchasing power and production that drop makes money difficult to spin, usually the central bank provides low interest so that good things when borrowing for productive needs.

Borrowing for productive needs, I think, is not so good, although it can help a little to circulate money in life, but the borrower also has to think about the smooth running of his business so that he can pay off his loan to the bank or to the party he borrowed. And of course it makes the borrower feel a little depressed because to run his business in inflationary conditions is clearly not easy. Because the price of goods becomes more expensive and the currency becomes cheaper so that there are fewer purchases.