9 Things To Remember Before Taking a Loan

every person needs to take a loan at some point in his life. the loan amount can be small or large according to the need. for example, when buying a house or a car, we need a loan from the bank. similarly, when a big expense comes suddenly, we borrow money from a friend, relative or a person who works together in the office, otherwise we pay the huge expenses with a credit card and repay it in the future as per convenience. in this way, whether the debt is small or big, it is needed by everyone from time to time.

in this article, the team of latticemaze.in advises its readers to keep in mind the nine things they need to do before taking a loan. by doing so, you will never fall into the debt trap nor will you feel your budget messed up.

1. Borrow according to the repayment capacity

Take a loan by any means, so make sure that this amount is according to your ability to repay the loan. that is, by saving money from your regular income, you can be able to repay the loan amount in a certain time.

2. Take a loan for a minimum period of time

The longer the loan repayment period, the more amount you have to pay in the repayment of the loan. it is believed that the shorter the tenure of the loan, the better. on the extension of the repayment period, the amount of emi decreases, but the total amount to be repaid by the lender increases.

for example, let’s say that kartik has taken a loan of rs 50 lakh at the rate of 10 per cent for 20 years. his emi will be rs 48,251.

if he increases his emi at the rate of 5% per annum, then this loan can be completed in 12 years.

at the same time, if the emi is increased annually at the rate of 10% the loan will be terminated in 9 years and 3 months.

3. Emi should be given at a certain time

Keep in mind that whether the loan is for a short period of time such as a credit card bill or a long-term such as a home loan, make the payment on time. if you miss out on paying a single installment or delay the payment, it has a direct impact on the credit profile. due to which you may have to face difficulties in taking a loan in the future.

4. Don’t take a loan to invest or waste money

Don’t borrow money to invest. investment options such as fixed deposits, bonds that give fixed returns can never match the interest charged on a loan. investments in equities are extremely volatile. never invest in such a way. also, never take a loan to meet your expenses.

5. Be sure to take insurance with a large amount of loan

If you take a big loan like home loan or car loan, do not forget to take insurance together. take a term plan equal to the loan amount. this is because if something happens to you and the people dependent on you are not able to pay the emi, the lender takes your assets. by taking a term plan, the housemates will not have to struggle financially in your absence.

6. Compare the prices in the market when making a purchase

If you are buying a property by taking a loan, then make sure to compare the prices in the market. if you get the right deal, you may have to take a loan of less amount. the lower the loan amount, the better it will be for the lender.

7. Read the terms and conditions related to debt

To avoid any sudden situation, read the terms and conditions while taking a loan. if you do not understand the context of the legal document, seek the help of a financial advisor.

8. Try to take all the debts from one place

If you have taken more than one loan and all of them are from different banks or financial companies, then try to get them all transferred to the same bank or financial company. once the loan amount is in one place, the bank can offer you attractive interest rates under facilities like balance transfer. by doing this, the emi burden on you will be reduced. at the same time, use the extra income received from time to time to repay the debt. if you are employed, then you should pay off your debts when you get a bonus in the company, if you get an increment or incentive hand.

9. Take loans for essential things, don’t affect plans made for the future.

In simple words, never use a retirement fund for your children’s studies or marriage. there are options like loan and scholarship for studies which cover the expenses of studies. but there is no such attractive product in the market through which you can meet your retirement needs. keep in mind that the retirement plan is as important as a child’s studies. the specialty of a good financial planning is that to meet one need, do not affect the plan of the other important thing.

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