Things To Assess Before Going For A Loan

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There is a famous saying “Desire Is A Well Which Never Dries”. You have bought so many things for yourself. Are you happy? No….There are still many things to buy. Unfortunately you cannot afford a car, the latest laptop and a foreign holiday on the salary you earn. Where there’s a will…There’s a way. You could always avail a loan to fulfill your hearts desires. But do you know what a loan really is? You better make an assessment of these things before you avail a loan.
Can you afford the loan?
The first questions you must ask yourself before you even think of availing a loan. Can you afford the EMI’s? Will you be able to make the repayments regularly? Do the EMI payments put a burden on your family? Have you to compromise on the bare necessities of life?
Simply put…. Can you afford the loan?
If you cannot afford the loan, don’t make the mistake of trying to avail a loan. The problems you would face if you fall in the debt trap are unbearable. Before availing a loan make this decision. Do you really need the latest laptop or a foreign holiday? Can you do without it? If your answer is yes, then it is wise to postpone the purchase to a later date or go on a foreign holiday when you can afford it without having to borrow for it.
Why borrow?
You have to answer this question before you avail the loan. Are you borrowing just because you want to make the repayments for your laptop purchase in installments? You can afford a laptop but you want to keep your money with you. You prefer to pay in installments as you feel you can easily afford the repayments. Maybe you cannot afford to purchase the laptop but you desire it immediately? Whatever be your reasons make sure you can afford to pay back the borrowed amounts with interest, in the allotted time.
Study the purpose of the loan. Why is the bank giving you a loan? In this World nothing is free. You have to return the borrowed amount with interest. Make sure you are not paying a very high interest on the loan.
Study the cost of the loan
Your loan could have hidden costs. Your bank could charge you a loan processing fee. The loan processing fee could be as high as 0.5%-1.0% of the amount you borrow from the bank. If you borrow INR 40 Lakhs from the bank for a home loan, your loan processing fee could be INR 40,000. Study the processing fees and annual charges of the loans if any.
Don’t burden your family with loans
You are confident you can repay your loan in time. But what if you are not around? Can your family bear the burden of these loans? Make sure you have availed a term life insurance plan so that you do not leave the burden of the loan with your family.
Keep an eye on your credit score
If you avail a loan you need to make the repayments in time. If you fail to do so your credit score gets affected. Your record of repayments is maintained with the credit bureau. A default or a delay in repayments affects your credit score. You would find it very difficult to avail a loan in the future if you have a bad credit score.
You work very hard to lead a good life. Would you want the hassle of loans burdening you? There is a time in life when you need to be free of debts and loans. A loan free life is a life free of worries.
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