“Loan Planning” never thought of doing something as such? Well, we might change your perception of the matter towards the end of the article. Keep on reading to find out how.
Generally, people assume that financial planning is all about using your available resources to generate more wealth. Although that is correct, it nevertheless fails to acknowledge the fact that most of the times we do not have enough money to meet our goals. That is when borrowing options such as loans come into the picture.
However, in this technologically advancing era, banks have intensified their marketing techniques – offering their customers varied loan availing perks in the form of low rates, others offer swift disbursal and straightforward processes.
Discerning the best loans to facilitate your financial situation without much hassle becomes a little tricky. That is why Paisa Invest has sorted a list to guide you as you go forward with your decision to avail loans.
Rules to follow when taking a loan:
- Borrow as much as you can repay: One should not take loans higher than their net monthly income. As a rule, one should opt for a car loan that amounts not more than 15% of their income while a personal loan should not exceed 10% of their net monthly income.
- Keep tenure as short as possible: Usually, people opt for long tenure loans the reason being that the EMIs are often less for such loans. However, people often fail to recognize that long tenure loans incur high outgo tax. Hence, one should opt for short tenure loans as compared to long tenure loans.
- Ensure timely and regular payment: Failure in securing consistent and timely payment of loan dues results not merely in the non-payment penalty but also affects your credit profile. It might further lead to the barrier on the path of seeking loans in future.
- Do not borrow to invest: People often seem to consider a loan to invest. Doing so is, however, not prudent as per effective economic planning. The reason being that loans used for ultra-savings like FD and so, turn out to have a high outgo interest rate as compared to the ones offered of such ultra-savings mode. Apart from those, investments with high returns are volatile, increasing the risk factor of the same.
- Substitute high-cost loans: Being aware of the current loan rates as per the RBI can assist you on this. One should opt for a cheaper loan with the difference of at least two percentage points from their previous loans to subdue the prepayment penalty on the old loan and processing charges of the new loan.
- Avoiding loans can affect your retirement plan: There are some loans such as education loan that acquire a minimal or low-interest rate. Hence, jeopardizing one’s financial future such as retirement plan for children’s education investment and so is not prudent for sound financial planning.
Hence, are a few of the most fundamental steps to consider when opting for a loan. However, consulting a professional financial consultant such as Paisa Invest can help you have a smooth means for doing the same.