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Things To Check Before Availing A Loan?

IndianMoney.com Research Team | Posted On Saturday, June 02,2018, 06:05 PM

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Things To Check Before Availing A Loan?

 

 

Banks and NBFCs are doing their best to make borrowing easy. Car loans and home loans are helping the youth in India, own cars and homes at a young age. This would not be so simple with the income many of these youth earn.

Your repaying capacity helps banks decide on your loan eligibility. Before availing another loan, you need to ask yourself, can I afford it?  It’s very important to distinguish between a good loan and a bad loan.

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Things To Check Before Availing A Loan?

If you are availing a home loan to buy a house or a commercial vehicle loan to buy a truck, then this is a good loan as these assets would definitely give returns in the future.

If a loan does not help you generate income and it is used to purchase a depreciating asset like a car you don’t need, then this is a bad loan. Your financial health is affected if you go for such a loan, when you have an existing loan and there is no increase in income.

Availing too many loans could lead to a default. Your credit score is badly affected.

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How Much Loan Can You Really Afford?

Avail loans only if you can repay them and not if they affect other financial goals and obligations. If you start buying things on impulse, these additional payments could end up disturbing your whole financial set-up and well-being. So, before you add another loan or make any other commitments consider your current financial situation and then make a decision. Ask yourself these questions:

  • Can you set aside your credit cards for a month and live only on your salary?
  • How much do you spend out of your take-home pay on loan repayments?
  • Do you have enough savings set aside in case you lose your job?
  • Do you have money for retirement?
  • Do you plan ahead and save for a rainy day?
  • Do you file income tax returns on time?

Before availing a loan make sure you avail a good loan. A home loan to buy a dream house, a car loan to buy a car you really need, a commercial vehicle loan to buy a truck or a bus to run a transport business, a business loan to start a small business, an education loan to give you quality education and a bright career, all these loans are good loans.

If you avail a personal loan to go on a holiday, this is a bad loan. Personal loans charge high interest and when you come back from that holiday, you have all those EMIs to repay. Ditto with credit cards. So make wise decisions when availing loans.

Be Wise, Get Rich.

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