How easy it sounds, at some time in our life we have always
felt the need to borrow, but then when it comes to repayment, we get stuck. One
of the golden rules for borrowing is, borrow only if you are going to create a
long term asset or the asset is going to increase your earning capacity. This
sounds good, but then banks make some good offers for borrowing, some give low interest
rates, some give loans with less paper work others pass the loan in a jiffy,
all this is very tempting. We are bombarded with phone calls, SMS’s and emails
from banks. Now we also have loan aggregators, who would allow you to compare
loans for different purposes with interest rates and give you the best offers.
HDFC Bank offers loan through net banking. Whatever the options, ultimately you
have to repay. So take care and follow the following rules
Borrow only as much as you can repay. Ensure that your
monthly outgo towards loan repayments (all loans taken into account) does not
exceed 50% of your net income. Keep the repayment schedule as short as
possible. The sooner you repay your loan, you will have surplus available to
build other assets. If the loan period is longer, you end up paying interest
for this longer period. We know it is tempting to increase the loan period, as
the EMI would be lower. Remember that interest rates keep varying, today it
might be low, but rates will go up as well and when they go up your tenure
would go up. Ensure that you repay your debts on time, all lenders charge a
penalty for delayed payment and add to it compound interest i.e. interest on
the interest due and this is calculated monthly. If you delay, it also affects
your credit profile. Making it difficult to get loans later when you would need
it again.
Buy a term insurance equivalent to the amount of loan, so
that if anything happens to you, your family members are not burdened with the
loan repayment. Usually lenders would try to sell you a reducing loan insurance
plan, but it is better to take a term plan and let it continue till your
earning life. Whenever interest rates fall, search for better interest rates,
because lenders do not offer better rates to existing borrowers. Last but not
the least, read through every paragraph before signing the dotted line. Banks
might say they are standard terms, but if you are not comfortable, do not sign.
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