On her international holiday, Pragya sulked silently for she couldn’t buy the lovely Louis Vuitton bag that she saw in the show window of a fancy store in France as it was costlier than what they could afford. Her husband, Alok said comfortingly, “All of us are poor against our wishes.”
How true is that!
In a perfect world, we all would have enough money to fulfill all our desires. Alas, that isn’t a reality. And so to meet our demands, at some point or the other, we seek credit.
Here is a compilation of quick pointers before you take a loan:
One. Never borrow beyond your capacity. There is an old saying, “Cut your coat according to your cloth”. It is simple. If you cut your coat larger than the cloth you have, you will be left with nothing but trouble. Similarly, you are bound to land in hot soup, if you borrow beyond what you can afford to repay.
Be realistic about your needs and don’t be coaxed by bank offers. Sometimes, you may give in to your temptation to borrow in excess of your requirement, because loans are easily available in this competitive market. But soon you will be facing a towering liability; one that will be difficult to manage given your means. When you do not service your loans on time, your cibil score takes a beating, making your chances of accessing credit in future very bleak.
Two. Don’t jump at the first offer you are given. Compare loans on their interest rates. With the technology at your behest make good use of it. Always compare the terms of loans offered by different lenders online. This will help you gauge the market and possibly take advantage of a lower rate of interest.
Three. Calculate your EMI beforehand. There are several online tools available such as a loan EMI calculator. This is an important step as it helps you plan your budget accordingly. You can adjust your terms — like reduce your loan amount or increase your tenure to arrive at a comfortable EMI — without compromising on your budgeted monthly expenses.
Four. Further to the point stated above, try to keep a short tenure. Tenure varies from product to product. So, for a personal loan the maximum tenure would be five years. For a gold loan mostly it is one year. While for a home loan, it could even be 30 years.
With a longer tenure, say 30 years, you will have a smaller EMI. But know that the longer the tenure, the higher is the interest paid, even though the EMI would be less. So, keeping a shorter tenure would mean you would wrap up the loan earlier, and with a lesser amount of interest.
Five. Once you have taken a loan make sure you service it well in an orderly fashion. This helps build a strong credit score. Your timely repayments help potential lenders assess your attitude towards your financial commitments. Make scheduled payments to better your chances of taking loans in future.
Six. Don’t mix pleasure with obligations. Be alive to your duties towards your lenders. Some people would happily splurge the borrowed money, without realising that it has to be repaid. With a blink of an eye this party can become a burden. Some people use borrowed money to speculate or invest in capital markets. Nothing can be more catastrophic. Given the volatile nature of the markets, you could suffer huge losses and at the same time be facing a loan that must be repaid on time. That’s a double whammy!
Seven. Be sure to read the fine print. Sometimes the legal language used, in the laid down terms of loan agreement, can be tough to understand. Yet, you must not skip reading them at any cost. Take professional help if you have to, but be sure you understand all aspects of the loan including the late fees, prepayment penalties, etc.
Eight. Don’t stop exploring the market even after you have taken a loan. Stay updated with market trends and latest news on changes in regulations. For example, recently home loan interest rates were slashed with the option to switch to MCLR. This has helped scores of borrowers, who had taken a loan at a higher rate of interest, take advantage of a lower rate of interest.
Supposing you took a loan two years ago. But today you are given an offer from a competing bank to take over the loan at a lower rate. Then, you can transfer your balance from one lender to another and take advantage of better terms.
Nine. Don’t forego planning for the future. Make an emergency fund and set it aside before taking a loan; insure yourself adequately; curtail your expenses; and invest for future and retirement days. Don’t let your current financial obligations serve as an obstacle in planning for the future.
Ten. An EMI affects the entire household’s budget, affecting all members of the family. It is therefore important to keep your family members in the loop, when planning to take a loan. This helps them to be prepared and jointly share the responsibility, if not financially then at least morally.
We hope these tips help you put together a workable plan, that will help you sail through the period of an active loan.
Note : This post is sponsored by Credit Sudhaar.
How true is that!
In a perfect world, we all would have enough money to fulfill all our desires. Alas, that isn’t a reality. And so to meet our demands, at some point or the other, we seek credit.
Here is a compilation of quick pointers before you take a loan:
One. Never borrow beyond your capacity. There is an old saying, “Cut your coat according to your cloth”. It is simple. If you cut your coat larger than the cloth you have, you will be left with nothing but trouble. Similarly, you are bound to land in hot soup, if you borrow beyond what you can afford to repay.
Be realistic about your needs and don’t be coaxed by bank offers. Sometimes, you may give in to your temptation to borrow in excess of your requirement, because loans are easily available in this competitive market. But soon you will be facing a towering liability; one that will be difficult to manage given your means. When you do not service your loans on time, your cibil score takes a beating, making your chances of accessing credit in future very bleak.
Two. Don’t jump at the first offer you are given. Compare loans on their interest rates. With the technology at your behest make good use of it. Always compare the terms of loans offered by different lenders online. This will help you gauge the market and possibly take advantage of a lower rate of interest.
Three. Calculate your EMI beforehand. There are several online tools available such as a loan EMI calculator. This is an important step as it helps you plan your budget accordingly. You can adjust your terms — like reduce your loan amount or increase your tenure to arrive at a comfortable EMI — without compromising on your budgeted monthly expenses.
Four. Further to the point stated above, try to keep a short tenure. Tenure varies from product to product. So, for a personal loan the maximum tenure would be five years. For a gold loan mostly it is one year. While for a home loan, it could even be 30 years.
With a longer tenure, say 30 years, you will have a smaller EMI. But know that the longer the tenure, the higher is the interest paid, even though the EMI would be less. So, keeping a shorter tenure would mean you would wrap up the loan earlier, and with a lesser amount of interest.
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| Enjoy a beautiful financial life. Follow the golden rules on loans. |
Five. Once you have taken a loan make sure you service it well in an orderly fashion. This helps build a strong credit score. Your timely repayments help potential lenders assess your attitude towards your financial commitments. Make scheduled payments to better your chances of taking loans in future.
Six. Don’t mix pleasure with obligations. Be alive to your duties towards your lenders. Some people would happily splurge the borrowed money, without realising that it has to be repaid. With a blink of an eye this party can become a burden. Some people use borrowed money to speculate or invest in capital markets. Nothing can be more catastrophic. Given the volatile nature of the markets, you could suffer huge losses and at the same time be facing a loan that must be repaid on time. That’s a double whammy!
Seven. Be sure to read the fine print. Sometimes the legal language used, in the laid down terms of loan agreement, can be tough to understand. Yet, you must not skip reading them at any cost. Take professional help if you have to, but be sure you understand all aspects of the loan including the late fees, prepayment penalties, etc.
Eight. Don’t stop exploring the market even after you have taken a loan. Stay updated with market trends and latest news on changes in regulations. For example, recently home loan interest rates were slashed with the option to switch to MCLR. This has helped scores of borrowers, who had taken a loan at a higher rate of interest, take advantage of a lower rate of interest.
Supposing you took a loan two years ago. But today you are given an offer from a competing bank to take over the loan at a lower rate. Then, you can transfer your balance from one lender to another and take advantage of better terms.
Nine. Don’t forego planning for the future. Make an emergency fund and set it aside before taking a loan; insure yourself adequately; curtail your expenses; and invest for future and retirement days. Don’t let your current financial obligations serve as an obstacle in planning for the future.
Ten. An EMI affects the entire household’s budget, affecting all members of the family. It is therefore important to keep your family members in the loop, when planning to take a loan. This helps them to be prepared and jointly share the responsibility, if not financially then at least morally.
We hope these tips help you put together a workable plan, that will help you sail through the period of an active loan.
Note : This post is sponsored by Credit Sudhaar.
