In India, the average debt of a householder is Rs. 3.86 lakh.
That is around $12,000 a month.
However, according to a report released by a credit bureau, a whopping 97 per cent of households owe less than Rs. 2 lakh.
The report, titled “How to pay your mortgage in India,” shows that the average borrower owes just Rs. 1.3 lakh.
“With such low interest rates, many borrowers are not paying any debt and instead are borrowing from the banks,” the report says.
“Many borrowers are borrowing for long-term loans that have a fixed term and interest rate,” the study says.
“This is often the case with residential mortgages.
The rates are set by the lenders for a certain period of time.”
According to the report, a borrower who earns just Rs 2 lakh a month could borrow Rs. 9.5 lakh for a two-year term, which would mean the average income for the borrower is around Rs. 16,000.
“For this type of mortgage, the borrower can get loan repayment terms of between one and three years, which is more favourable for a borrower with low income,” the Credit Suisse India report says, adding that, “In most cases, a loan is taken by the borrower on repayment, which allows him to repay the loan with interest.”
In fact, many loan-paying borrowers are already debt-free.
“Almost two-thirds of the borrowers in the report have taken out loans at least once, according the report,” the Bureau of Economic Survey of India says.
The report also shows that most borrowers who take out loans for long periods of time are already in a lower income bracket.
The bureau says that while the average cost of living in India is higher than the US, the gap is smaller for borrowers from poorer sections of the population.
The average household in India earns around Rs 10,000 per month, the report shows.