Loans are crucial to meet financial goals. If you need money for quality education, to buy a house, a start a business, finance luxuries or go on a foreign holiday, there are loans for every occasion. What’s special about loans? Well, you can make crucial decisions or even indulgences, without waiting to collect the money.
There are good loans and bad loans. The loans like education loan, home loan or even a car loan to buy a car you badly need are good loans. Personal loan to go on a holiday or swiping a credit card to buy something you don’t need are bad loans.
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This is the first thing to do before availing a loan. Compare loan rates across banks and NBFCs and then take the loan. Home Loan rates are different across banks. SBI charges the lowest home loan rates. Home Loans may be fixed or floating. The fixed-rate home loans are fixed across loan tenure while floating rates change with market changes. Search for the best rates before locking on to the loan. Do not look at just interest rates. Look at processing fees, prepayment charges and so on.
See Also: When Should I Get a Personal Loan?
The loan tenure is crucial when it comes to monthly EMI outgo. Lower loan tenure means a higher EMI. It also means faster repayment and saves interest. Decide loan tenure based on the repayment capacity and other financial goals. Go for a shorter tenure only if you can comfortably make the EMI repayments within the due dates. You mustn’t sacrifice any major financial goals when making the loan EMI repayments.
If you make loans or credit card enquiries, banks and NBFCs fetch the CIBIL report and then evaluate your creditworthiness. Your requests are considered to be hard enquiries and credit bureaus like CIBIL, reduce the credit score. If you make multiple enquiries in a short time, the credit score gets reduced.
Never miss your EMIs. Any delay or default in loan or credit card repayment mean hefty fines and negatively affects credit score. This is because the repayment track record gets maximum weightage when a credit score is calculated. Delaying repayments means you get a bad credit score and you can’t avail important loans like a home loan.
See Also: Personal Loan In Bangalore
Co-signing a loan account makes you responsible for timely repayments. A loan default impacts the credit score of the guarantor. Never co-sign the loan unless you are sure of repayment capacity. The creditworthiness of the primary borrower is crucial when co-signing the loan. So, always keep a close eye on the loan (This is if you are the guarantor) for timely repayments.
An emergency fund helps meet financial needs on a sudden job loss. This must be at least 6 months of living expenses if you are married. Make this 3 months if you are unmarried. The money comes in handy to repay existing loans, insurance premiums, children’s education expenses and so on. If you don’t have an emergency fund, you would be forced to default on loans or redeem investments meant for financial goals.
See Also: Types of Personal Loans
The credit report may contain wrong information because of clerical errors. This could be a mistake of the lender or the credit bureau like CIBIL. Incorrect information affects credit score.
Check your free credit report and credit score at IndianMoney.com regularly. Report any inconsistencies to the concerned lender or credit bureau. The rectified credit report means a higher credit score. Checking credit report regularly prevents identity theft. This is crucial if you have co-signed a loan. Also, check credit score regularly if you plan to apply for a loan or you were denied credit. Do this at least once a year.
See Also: How to Get Personal Loans Instantly?
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