This is a great saying by Ogden Nash, “Some debts are fun when you are acquiring them, but none are fun when you set about retiring them.” If you live on borrowed money, you could soon fall in the debt trap. Don't believe me? Take a look at this saying, "Interest on debts grow without rain."
Our great country has just celebrated its 71st Independence Day. I have a question for you this Independence day. Are you and crores of our citizens really free? Do you enjoy financial freedom on our 71st Independence Day?
If you are in the debt trap, you can never enjoy true freedom. So why not make a pledge to come out of the debt trap this independence day? Want to know more on loans? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice / education to ensure that you are not mis-guided while buying any kind of financial products.
A survey conducted by S&P nearly a couple of years ago revealed startling findings. More than 70% Indians fare badly in financial literacy. Today, whether you and more of our citizens are financially literate is anyone's guess. One of the main problems of financial illiteracy? Well...you fall in the debt trap. You borrow so much, so fast, you just can't repay. Let's learn the 3 smart ways of getting out of debt.
1. Find out how much you owe
Have you availed loans from family, friends and banks? The first thing to do... Find out to whom you owe the money and how much.
Obtain a credit report from cibil which gives you all your credit information. You get an idea of total outstanding debt (loans that have yet to be repaid) and your repayment history.
Finding out how much you owe gives an idea on how to make the repayments.
Availing a loan is not necessarily a bad thing. You only need to make sure you are availing a good loan. So how do you know what's a good loan? Any loan taken to buy an asset whose value increases with time is a good loan. You avail a home loan to buy a property. This is a good loan. The value of the property appreciates with time and you are soon the proud owner of a dream home.
What about an education loan? You borrow money from the bank to pay your college fees. On passing out of college you are placed in a reputed Company and earn a good salary. The education loan has given you a financially rewarding career. What if you avail a personal loan to go on a holiday? A personal loan charges a very high interest and you will be repaying the money borrowed for many years. Is the headache of repaying the personal loan worth the holiday? Don't you think this is a bad loan?
Avail good loans and repay them on time. You will soon be on the path to riches.
The RBI cut the repo rate by 25 basis points to 6% a couple of weeks ago. Banks have been cutting interest rates on home and car loans in recent times. Yes, interest rates have been falling since the last 3 years, but there is no guarantee they will continue to do so. It is up to you to use the falling interest rates to your advantage.
Today, banks have a new benchmark lending rate for new borrowers called Marginal Cost of Lending Rate or simply MCLR. If you have availed a home loan on or after April 1st 2016, you come under the MCLR. MCLR-linked loans will be reset for a maximum of one year. So, you will have a new interest rate on your home loan at a pre-decided time and for a maximum period of one year.
What if you have availed the home loan before April 1st 2016? You would fall under the base rate regime, where the rate is much higher compared to MCLR. The average home loan rates under MCLR are less than 8.75% and if you have a good Cibil score, you could be paying an interest of just 8.35% on that home loan. Home loans under the base rate regime could be 9.5% - 10% across banks in India.
If you find home loan interest rates under MCLR much lesser than the interest rates you are currently paying, switch your home loan from base rate to MCLR , either with the same bank or with another bank.
You and other citizens of India are celebrating our 71st Independence Day. Make a pledge for financial freedom this Independence Day. A small step towards financial freedom can get you out of the debt trap. Be Wise, Get Rich.
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