Bank Loan: Keep these 5 things in mind while taking loan, you will never have any problem

Mr journalist News, digital Desk- New Delhi: The number of people taking loans from banks in the country is increasing rapidly. It has often been seen that before taking a small loan from the bank, we take advice from an acquaintance and even after all this, some mistake happens. 

Therefore, today we will talk about those things related to bank loan. We will talk about things that should be kept in mind while taking a loan;

1. Evaluation of financial position

Before applying for a bank loan, it is important to evaluate your current financial situation. Assess your income, monthly expenses and existing debt obligations. This analysis will help you decide whether you can afford the monthly loan payments without putting a strain on your budget.

Apart from this, also pay attention to your credit score as it plays an important role in loan approval and interest rates. A personal or home loan should always be in line with your financial goals without jeopardizing your financial stability. For example, it should not be that you are spending a major part of your income in repaying the loan.

2. EMI should be within your range

Another important thing while taking a loan is that the monthly payment i.e. EMI should be within your range. It should not happen that a large part of your salary or income is going only in paying EMI.

That is why it is said that a clever person is one who will never put more in his mouth than he can eat. Therefore, always keep in mind that the loan EMI should not have much impact on your other important expenses.

And if you are taking a car loan, then keep in mind that the EMI should not be more than 15% of the net monthly income whereas in case of personal loan, the EMI should not be more than 10%. For all types of loans, monthly expenses should not exceed 50 percent of your net income.

3. Keep the loan tenure short

You must have heard about how investing money for a long term uses the power of compounding. Well, in case of loans it works completely differently. The longer the loan tenure, the greater the interest burden on the borrower.

If you take a loan at 9.75% for 10 years, the interest will be 57 percent of the principal amount. If the tenure is 15 years, this figure reaches 91 percent and in case of a 20 year loan, it reaches 128 percent.

4. Mortgage Linked Insurance Scheme

When you think of taking a big bank loan, then also assess the worst case scenario in that case. If a person taking a bank loan dies suddenly, it will be a huge burden on his family.

However, an insurance policy like Mortgage Linked Insurance Scheme will not only reduce the burden on your family, but the remaining amount of the bank loan will also be reimbursed by the insurance company. With this, the future of your family will remain secure.

5. Read every document carefully before signing;

Before signing any loan agreement, read and understand the terms and conditions carefully, including the fine print. Pay attention to details like interest rates, repayment period, prepayment charges, late payment penalty and any other charges associated with the loan.

If there is any clause or jargon that you do not understand, calmly inquire about it with the loan taking bank. Understanding the loan agreement in its entirety ensures that you are aware of your rights, responsibilities and the potential risks involved.