What are the things to consider when taking a loan?

What are the things to consider when taking a loan?

Taking out a home loan is not a new thing in India, but over the last few years, the trend of taking out an auto loan or traveling abroad or taking a personal loan for any other purpose has been on the rise.

 It used to take days for traditional banks to approve loan applications, but now due to non-banking financial companies and some neo banks, loans can be obtained within hours. Your CIBIL score plays an important role in determining whether your loan will be approved.  Your CIBIL score can be bad if you pay off the loan installment.  Which will make it difficult to get a loan in the future.

What are the things to consider when taking a loan?

 That is why experts recommend to be careful while taking a loan and to read its terms carefully.  Ignoring some commonalities can be costly.

What are the things to consider when taking a loan?

 Banks and landing apps are routinely used by the customer to get a loan through various means including advertisement, SMS and email as soon as the website is visited while taking a loan.

 Nishant Parekh, a chartered accountant by profession, says, "If a salaried or self-employed person is taking out a home loan, how much coverage they get should be taken into consideration."

 "As government banks generally take into account the value of the document, while private banks take into account the market value. The loan percentage is important in choosing a particular option out of a number of options.  It should be clarified, though. "

 "Apart from this, the repayment schedule should also be taken into consideration. It is advisable to choose the option which does not incur pre-payment charges. It may be beneficial in the long run even if the period is long."

 Parekh says that in case of personal loan, the rate of interest and the charge for pre-payment should be taken into consideration.

 Sometimes an 'advance installment' is taken by the financial institution, the burden of which ultimately falls on the customer.

 When taking a personal loan, the advisors recommend choosing an arrangement whereby the interest is to be paid on the required amount and the remaining amount can be obtained if required.

 According to Anand Shingala, a chartered accountant and financial advisor, "According to the provisions of the Reserve Bank of India, when a person takes a loan, he has to provide a sanction letter, which includes loan pre-payment, loan for-closure  There is a description of what charges will be levied in case of loan repayment or transfer of loan elsewhere).

 "Apart from this, it also contains information on what kind of charges were levied by the financial institution."

 "These approvals are mostly in English and are full of complex financial and legal terms and terminology. Therefore, one should read them carefully and seek the help of a financial advisor if needed."

 If there is any objection or ambiguity in the plan or rules, clarification should be sought from the lending institution immediately.

 What to look out for?

 The Sibyl score remains an important aspect when taking any type of loan.  According to Ahmedabad-based Chartered Accountant Mukesh Devpura:

 "A person should read the letter very carefully, apart from this he should pay special attention to his Sibyl score."

 "It becomes difficult for him to get a loan if he has not repaid a loan in the past or has paid his installment."

 "Banks usually do not charge for home loan prepayment or foreclosure, but this is not the case with personal loans. However, much of it depends on the borrower's profile.  . "

 Do this while taking a loan

 Devpura says to focus on a few other things besides this.  like :

  •  Take out a loan of as much as you can repay
  •  Keep paying regularly and on time
  •  Try to repay the loan early
  •  Don't take out a loan for an item or service or vacation that you don't need
  •  Don't take out a loan in the hope of getting higher returns from elsewhere
  •  If the loan amount is large then definitely take a loan
  •  Pay off expensive loans early and keep trying to get cheap loans, considering factors like foreclosure charges or processing fees at this time.
  •  Convince your spouse and family about the loan, inform them and keep them informed.

 Who decides the loan rate?

 Sibyl scores are usually between 300 and 900.

 If your score is close to 900 then the chances of getting loan approved and getting low rate increase.

 Similarly, if the Sibyl score is 700 or less, it becomes difficult to get a loan and even if it is obtained in some circumstances, the rate is very high.

 Individuals take out different types of loans for different needs.  Depending on the priorities set by the government and the banks, the loan rate may be higher or lower.

 Apart from this, even if there is a conclusion, the loan rate may be affected.

 Personal loan

 When a person takes a loan to meet his contingency need, it is called a personal loan.

 The loan is given considering the amount of the person and his ability to repay the installment.  The Sibyl score is also taken into account for this.  An individual can spend on 'legally acceptable' matters subject to the terms of the loan.

 If a person wants to take a loan on the collateral of a property (land, flat, house, etc.), he can get a lower rate as compared to a personal loan, as the lender has solid assets.  It is called Lone Against Property.

 Similarly, a gold loan is a type of personal loan.  However, in the event of a sudden fall in gold prices, the lender may demand a certain amount to reduce the risk.

 Auto loan

 A person can get a loan to buy a car or a two-wheeler.

 If the vehicle is older, the rate may be higher.  Similarly, if it is a commercial vehicle or a tractor, its rates may vary depending on the priority.

 Under no circumstances should the total amount of all your installments exceed 50 percent of your income.

 The reputation of the lender should also be taken into consideration while taking a loan.  This is especially important when new means and units of financing have become accessible.

 Home loan

 As the name implies, it can be used to take home.  Apart from this, a 'top-up' loan can also be obtained for its furniture, repair or construction.

 These loans are cheaper than others as they are a priority sector and the lender has the house documents.

 Loans are given for studying in higher educational institutions of the country or for studying abroad.

 Loans for industries take into account the merchant's ability, his income tax return and stock etc.  While the cost of going abroad in an educational institution, hostel expenses, fees etc. are taken into consideration.

 Apart from this, loans can also be obtained against shares, insurance, mutual funds and fixed deposits.  Which may vary depending on the amount deposited, and the risk.

(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. www.Tradtips.com suggests its readers to consult with their investment advisers before making any financial decision.)

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