Borrowing for living expenses can help you avoid selling an investment today. It does not remove the cost of your groceries, bills, or retirement spending. Instead, you keep the asset and add a debt. Before borrowing, work out when the monthly shortfall will end, how you will repay the loan, and what happens if the asset falls in value.
This is a fictional case study for people living on retirement income. It develops the money-management ideas in an existing Money & Why Korean article. It is not a recommendation to borrow, sell a particular investment, or choose a lender. The examples use made-up money units, not a currency conversion. Local lending rules, tax treatment, and contract terms need a separate check.
Borrowing for living expenses: the balance grows even if you do not sell
Imagine a household that is short of 100 units each month. It starts with no debt and borrows 100 at the beginning of every month. After twelve months, it owes 1,200 in principal. Principal means the borrowed amount that still needs to be repaid. Paying interest does not, by itself, reduce it.
For a simple illustration, assume a fixed annual interest rate of 6%. The household pays all interest from other cash and repays no principal during the year. The first 100 is borrowed for twelve months, the next for eleven, and so on. Those borrowing periods add up to 78 months. The simplified first-year interest is 100 × 6% ÷ 12 × 78 = 39 units.
This is not a current loan quote. Real bills may use daily interest, changing rates, and fees. If the household also borrows the money needed for interest, the debt does not stop at 1,200. That is why “we have not sold anything” is not the same as “our financial position has stayed the same.”
Option 1: find out whether the gap has an end date
Start here if borrowing seems like a short bridge until another income payment begins. Put expected income and essential spending on a monthly calendar. Include interest, loan payments, and bills that arrive only a few times a year. Then mark the month when the shortfall is supposed to disappear.
Next, check the repayment source. Is the money actually due to arrive? On what date? How much will be available after any deductions and other commitments? “The investment should recover soon” is not a dated source of cash. Nor is the hope that another lender will extend the loan.
This approach is useful when the gap is genuinely temporary. Its limit is that a calendar cannot make uncertain income certain. If the shortfall continues after the expected payment starts, the household has a recurring budget problem. A short-term loan may simply move that problem into next year with interest added.
Option 2: check what a falling asset value would require you to do
This matters if investments are being used as collateral. Collateral is an asset pledged to support a loan. Read the actual agreement to learn how the lender values it. Ask what could trigger a demand for more collateral or repayment, and when the lender could sell assets. Do not assume a home loan and an investment-backed loan have the same rules.
In a second fictional example, assets worth 5,000 support a debt of 1,200. The simple debt-to-asset ratio is 24%. If the assets fall 30%, their value becomes 3,500. The same debt is now about 34.3% of the asset value. Nothing new was borrowed, but the financial cushion is smaller.
Those percentages are arithmetic, not a lender’s approved borrowing limits. Actual tests depend on the agreement and on which assets the lender accepts. FINRA’s explanation of securities-backed credit describes how collateral shortfalls can lead to repayment demands or asset sales. We use that general risk principle here, not US-specific deadlines, borrowing limits, or tax rules.
Your next action is to ask for a clear example using your proposed loan and assets. Also ask who sends a warning and how to reach the lender. The limit of this approach is important: understanding the rules does not prevent prices from falling. You still need cash or another workable response if the rules require action.
Option 3: compare borrowing with a planned sale and a smaller shortfall
Use this when the main reason for borrowing is that selling feels painful. Put several choices on the same page: selling only what is needed, reducing the monthly gap, finding a dependable source of income, or borrowing. Compare the cash each option produces and the costs it creates.
For a sale, check transaction costs, any applicable tax, and how the remaining investments would change. For a loan, check interest, fees, payment dates, and the eventual principal repayment. Do not assume borrowing avoids tax forever or that selling is always cheaper. The relevant amounts depend on the asset, the contract, and local rules.
There is also a timing question. A planned sale may be different from a forced sale after a collateral shortfall. On the other hand, selling now means that money will no longer take part in future investment gains. Neither outcome can be judged from the original purchase price alone.
The point is not to pick a universal winner. It is to compare complete plans rather than the emotional difference between “keeping” and “selling.” A refusal to recognize an investment loss does not make the cost of new debt disappear.
Option 4: if you borrow, write down how the borrowing stops
This is essential when you have checked the alternatives and are still considering a loan. Set a personal borrowing ceiling, a repayment date, and a fallback source of cash. These are planning decisions, not permission to ignore the lender’s requirements. The lender’s limit is not a spending target.
For example, a six-month bridge needs a credible answer to a simple question: what money will repay the debt at month six? Include interest and fees in that answer. If repayment depends on selling an asset, test what you would do at an unfavorable price. A plan that works only after a strong market recovery is fragile.
Ask what happens if the rate rises, an extension is refused, or collateral rules change under the agreement. Keep the contact details and the relevant contract pages together. The limit is that a written plan cannot create repayment capacity. If no workable fallback exists, that is a reason to revisit the amount or the whole approach before committing.
Common question: if I can pay the interest, is that enough?
Not necessarily. Interest is the cost of borrowing, while principal is the debt itself. In the first example, paying 39 units of interest during the year still leaves 1,200 of principal outstanding. If everyday spending keeps exceeding income, another year can add more borrowing.
Also separate your assets from your available spending money. An account can look substantial while the household has very little cash for bills. Write down asset values, debts, and monthly money in and out as three separate figures. That makes it easier to see whether borrowing buys useful time or hides a lasting shortfall.
A practical next step
Before applying, finish one page: the monthly gap, the date it ends, the full borrowing cost, the repayment source, and the fallback if assets fall. Leave unknown answers as questions for the lender or an appropriately qualified adviser. Do not fill them with an assumed market rebound.
Reviewed on September 10, 2026. This is general financial education, not personal investment, credit, legal, or tax advice. Borrowing and selling both carry consequences. The goal is to understand those consequences before a bill, a deadline, or a lender makes the choice for you.