We are all looking for ways to learn how to make Passive Income in India that is safe and at the same time gives good returns as well. Traditionally, we have been lending our money to our friends, relatives, colleagues and other acquaintances with or without any collateral on the basis of our mutual trust or their market credibility in view of getting good returns from it. The current times have proved to be a tough one for this informal lending too. There are now concerns about this method on various levels in the quest to learn how to make Passive income in India.
There are several problems that are faced by people who are lending in this period as compared to earlier. Here are a few big ones:-
1. Lowering interest rates
With people losing their job and businesses falling apart, people are not able to pay the interest rate as high as 18-24% and thus the interest rate of such lending in the market is going down by a lot. In many cases, people who have running loans are also not able to adhere to their commitment of paying higher interest rates.
2. Frequent Defaults
The worst is when people default on the payment altogether.
3. Poor cash flows
Those who somehow make the payments are not very regular leaving us with irregular cash flow statements.
4. Relationships Suffer
Since informal lending is done to people who we are surrounded with, our friends and family, this leads to problems in our relationship.
One more problem with this kind of lending is that it is not scalable. With all the above points put together, we can clearly see informal lending is not at all healthy for our financial health in this weather of volatility.
What should be done then? Should we simply drop the whole idea of lending?
Well, No. The best way to lend in such times is to invest in Bonds or any other debt fund like treasury bills and commercial papers. The easiest amongst all will be bonds. Bonds are issued by both Government and Corporate Bodies each having its own Pros and Cons. Bonds issued by small corporates are having high interest rates but are more risky as compared to Government Bonds that give lesser returns. The choice can be made according to our risk taking ability which is not possible in case of Informal lending.
Since we are talking about safe returns here, we would not be getting a return as high as 18% but for an organised asset class, the returns are pretty high (as high as 12%). This also solves the problem of Irregular cash flows as the returns from Bonds are very periodic (annual or semi-annual). Another good thing about such investments is that we are sure about getting the total amount on the date of maturity whereas in case of Informal lending, it may get delayed for quite some time. Keeping all these points into consideration, we can say that lending is not harmful if we lend in the right place.
The traditional approach of earning from lending is no more viable these days, especially in the current market conditions. Hoping this article solves the mystery of How to make Passive Income in India: Safer than Lending, now the only thing left for you to do it, take ACTION.
To learn about how to make passive Income in more details, attend our FREE webinar, click here to register.