5 Rules To Be Followed Before Taking A Loan

5 Rules To Be Followed Before Taking A Loan

Banks and NBFCs offer many options when it comes to loans. At this age, technology that uses credit has also become easier, with several sites offering online approval of the same. Given this, you may be tempted to take out a loan for everything, but it can be harmful in the future.
In today’s world, you can discuss the saying “Money can not buy happiness,” because without money we find life a struggle. Although it can or can not buy happiness, it can affect our other feelings. The lack of finance in certain emergencies can lead to a cripple of our lives. In some cases, credit is often the last (or first) option. Today we take loans for a number of reasons, be it a personal loan for repairing a house, a travel loan to take a family on vacation, a car loan to buy that very latest model of the car that we have always dreamed of, etc.

Banks and NBFCs offer many options when it comes to loans. At this age, technology that uses credit has also become easier, with several sites offering online approval of the same. Given this, you may be tempted to take out a loan for everything, but it can be harmful in the future.

Below are listed 5 rules that need to be kept in mind before applying for a loan:

1. Ask yourself if you need a loan – the first thing you need to do is ask yourself if a loan is absolutely necessary. Taking a loan is a huge responsibility that can be changed. If you answered this question as “yes”, you should narrow the options. What type of loan are you looking for? If you want to buy a house, home loan is the best option, personal loan can be used for any urgent personal requirements, car loans, etc. In addition, you should never take out a loan to invest this money in tools such as shares, mutual funds, etc.

2. Always compare. Most of us go to a few shops before buying something, often comparing the cost in each store. Although we are active when it comes to small purchases, we often forget to do the same when it comes to loans. With the numerous banks offering loans, it is extremely important to compare the different options. There is an opportunity to get a loan that meets our exact needs. Various loans come with different interest rates. Blindly taking a loan with a high interest rate can damage our finances in the future.

3. Do the math: never use excessive amounts. The idea of ??having more money than we need is seductive. This often leads to the fact that we apply for a loan amount that is more than we require. While this may seem like a reasonable option, it can bite us in the future, as the repayment amount also increases. It is extremely important that the amount that has been borrowed is equivalent to the money that is needed. Each category of credit has a certain upper limit, and only because creditors are ready to offer money up to this limit, this does not mean that we must turn to this thought.
The loan amount must be such that it is repaid. This means that you need to properly calculate your finances.

4. DO NOT MISS the conditions. This is perhaps the most important rule that we must remember before taking a loan. Terms and conditions must always be read and understood before signing on to the dotted line. Failure to do so may lead to numerous consequences in the future that may have an adverse mental and financial impact on the borrower. These terms and conditions contain legal terms and provisions that could not be expected. If these conditions are difficult to understand, you should always consult an expert and ask him / her to explain them.

5. Make EMI available. The loan amount must be repaid in the form of monthly payments, this amount being determined on the basis of the loan term, the loan amount and the interest rate. Changes in any of these parameters can change EMI. You must try to do the math, ensuring EMI availability. Ideally, EMI should not be more than 30% of the borrower’s income. Ensuring timely payment of EMI also has a positive impact on the credit rating, which can help improve its chances of obtaining loans in the future. On the other hand, the inability to repay the loan in time adversely affects the credit score, which makes it difficult to obtain future loans.

We often follow certain rules in life, some of them are imposed on us. These rules, although not necessarily follow, can help us make the best decision when it comes to giving credit.

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