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WHAT BASIC RULES TO FOLLOW WHILE TAKING A LOAN

Posted on Friday May 10th, 2019

These days loans are the survival for many people and get them money at the time of necessity in a hassle free manner.it gives you the biggest advantage of not borrowing from your family and friends and the interest rate which you have to pay for your loan is affordable and budget friendly. The loans are in favor of the borrower as it is repaid in easy installments with flexible repayment tenures. To make your loan process more comfortable and hassle free, ShubhBank guides you What Basic Rules to Follow while Taking a Loan. You should follow them being a smart borrower.

AFFORDABLE EMIs: The one who never bite off more than he can chew easily is a smart borrower. You should be aware of the fact that your monthly installments should never be burden on you. Your EMI should not exceed from 15-20% of your net monthly income. It is always advisable that your monthly outgo towards your loans should not exceed 50% of your total monthly income. The loan to income ratio should always be in limit. If you would be unable to maintain this, it can trap you in a debt.

MAKE A COMPARISON BETWEEN CHOICES: When we decide to purchase a particular product, we use to go through multiple stores to compare the quality and price of the product. We all get active in terms of purchase and finding the best deal available whether it’s a small thing or big one. Same approach is also required in case of financial products especially loans. Many banks and NBFCs are offering different kind of financial tools at different rates of interest. The interest rates may vary from one lender to another lender. Paying more on interest would definitely push you in a loss. So it is very important to compare first and then decide according to your budget.

BE A SMART BORROWER: The temptation for more money leads you to apply for a loan amount which is more than you require. It might seem a smart option but it can be a burden for your future. The loan quantum increases with the tenure and EMIs. So it is good to borrow amount which is required to fulfill your needs and easily repayable. So always keep in mind to compute your finances and then borrow accordingly.

GO FOR A SHORT TENURE: In case of long term loan, EMI is lower and borrower can enjoy the tax breaks on loan but the long tenure ends up in paying more on the interest. The tax benefits bring the effective cost of loan down. Many people such as young employees with low income may not be able to afford a short tenure as the EMIs are always high. It is always a best option to repay the loan as quickly as possible by increasing the EMI.

GO THROUGH TERMS AND CONDITIONS CAREFULLY: You need to sign a loan agreement when you Apply For a Loan. Every loan agreement consists of terms and policies regarding loan and other legal things. In case you are unable to repay the loan, lender will have full authority to take action against borrower but that should be under the policies.