No matter how much money you have, there are times when you need a loan. It's in such times that you need to know the 5 golden rules of availing a loan.
The first thing you need to understand is the difference between a good loan and a bad loan. A home loan which helps you build an asset like a home, is a good loan. You get a roof over your head and the value of the property appreciates with time. An education loan is also a good loan as it helps you get quality education and a successful career.
Availing a personal loan for a holiday is a bad idea. This loan is unsecured and charges high interest. A personal loan must be availed only in an emergency. Availing a personal loan to splurge and spend on wants, could make it a bad loan.
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2. Opt for affordable EMIs
Your personal loan EMIs should not exceed 10% of your net monthly income and home loan EMIs should not exceed 35-40% of net monthly income.
SEE ALSO: Tips For Home Loan EMI Repayment
3. Go for short tenure
Let's say you have availed a home loan of Rs 30 Lakhs at 9.5% rate of interest for 15 years. Your interest outgo will be 88% of the Principal. If you increase the loan tenure to 20 years, your interest outgo will be 124% of the Principal.
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4. Avail insurance for loans of big-ticket size
5. Read the fine print before signing on the dotted line
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