5 Tips for a Happy Borrowing Experience
A vast majority of us face the problem of more significant needs, and not enough money to cater to them all.
It is on such occasions that we have no other alternative than borrowing some money. While friends and family can help us when we are in need of a few hundred or thousand rupees, but when it comes to big expenses, it is better to approach banks and non-banking financial companies (NBFCs).
While these lenders offer precisely what you need at attractive interest rates with quick disbursal for your convenience, there are a few tips that you must follow, to make the borrowing and the repayment process, effortless!
1. Borrow What You Can Repay Comfortably
This is the first commandment of Happy Borrowing. Before you zero-in on an amount that you wish to borrow, you must make all the required calculations to analyse, whether or not can you pay the EMIs (Equated Monthly Instalments) without facing any cash crunch in your day-to-day life.
As a thumb rule, your monthly expenses, towards all of your loans combined shouldn’t be more than 50% of your total household income.
2. Opt for a Short Tenure
While car loan usually lasts for up to years span, a Home Loan can easily come with a tenure of 20-30 years, owing to the hefty investment. Given that the longer the mandate, the smaller is the EMI, most people blindly go for it. However, this can prove to be a costly mistake, since the interest paid over a longer tenure is exceedingly high.
For instance, you take a Personal Loan of 10 Lakhs at 15% interest. Now let us compare the EMI, and the interest paid, in case you make a 20-year tenure, as against a 10-year tenure.
|20-Year Tenure||10-Year Tenure|
|Total Interest Payable||21,60,295
|Total Amount Payable||31,60,295
Notice that while the difference in EMI is barely 3,000, the difference in interest paid over the years is a whopping 12.25 Lakhs. Of course, there may be a possibility that due to low income or high expenses, that it may become difficult to accommodate the higher EMI, but considering the astounding difference in interest, it is worth going the extra mile to ensure quick and cost-effective repayment of the loan.
Another option that you can opt for is increasing EMIs. If you are unable to pay a hefty EMI right away, make sure to choose for a plan that allows you to increase your EMI every year. This will help you reap the benefits of a shorter tenure, without having to tighten the belt too much.
Remember this crucial aspect, while filling your Online Personal Loan Application and you will enjoy enhanced financial freedom.
3. Borrow Only When Absolutely Necessary
When borrowing from a lender, always remember the rate of interest is rather high. Hence, if you are taking a loan to invest the money in shares, bonds or fixed deposits, the chances are that you will end up paying more interest than earning profits. In case of equities, while you may be able to churn some money, the investment itself is volatile, thus putting a question mark on its feasibility.
Then again, borrowing for luxuriant experiences such as an expensive pleasure trip, an opulent car that costs far above than your yearly income, is a strict no-no. While these expenses might give you momentary happiness, they will prove to be too much of a burden. Moreover, they will have an adverse impact on your credit score. Hence, the further you are from taking such loans, the better it will be for your financial health.
4. Look for Better Offers
Before opting for a loan, make sure you have checked with at least 4-5 lenders for an impressive offer. Here, right from looking for low-interest rates, to assuring that your loan entails feature like prepayment and foreclosure facilities, complete with a low processing fee, you must do it all.
Then again, even after you’ve acquired the loan, always remember that you can switch to a cheaper loan, or a lender offering better service and facilities. Hence, every once in a while, look for a better alternative, a simple loan transfer can help you save on a significant amount of your hard earned money.
5. Replace High-Cost Loans
If you have more than a couple of Small Personal Loans under your name, debt consolidation is what you must look forward to. Rather than having numerous investments, it is always better to have a single low-cost loan. Hence, identify the loans, on which you are paying high interest rates and then replace the same with loans that do not cost as much.
We hope that you now know everything that can help make the process of procuring a loan, and that of repaying it more convenient than ever before!
Also Read: Here’s the Key to Your New Big Car
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