How rich become richer by taking debt?

The rich use loans to acquire assets that generate income, while the poor borrow to purchase liabilities that drain wealth.

Mindset Difference

Most people take loans for depreciating items like cars, gadgets, or luxury upgrades that lose value and require ongoing expenses. In contrast, the wealthy borrow strategically to invest in income-producing assets such as businesses, infrastructure, or projects where returns exceed borrowing costs.

Real-World Examples

In 2023, Mukesh Ambani secured India's largest corporate loan of $5 billion (₹41,000 crore) to rapidly expand Reliance Jio's 5G network, capturing market share faster. Gautam Adani similarly raised $3.5 billion (₹28,700 crore) to fuel growth in energy, airports, and infrastructure, leveraging low-interest debt for high-yield opportunities.

Why the Rich Borrow

• Accelerated Growth: Using only personal funds limits speed; loans enable quick scaling and early profits.

• Favorable Rates: Corporates access 6-8% interest loans, beating expected 12-20% business returns.

• Assets vs. Liabilities: Rich fund cash-flowing ventures like telecom towers or power plants; poor finance non-income items like iPhones.

• Tax Benefits: Loan interest is often deductible, boosting efficiency and investor appeal.

• Risk Management: Debt spreads exposure—success amplifies gains, failure dilutes losses.