What to Know About Loans


What to know about loans


If someone wants to take a loan and asks for your advice, you probably are more than willing to help, but do you really know what a loan is, what you should know before plunging into the ocean of loans. Now we all know loans are available for the purchase of houses, consumer electronics, refurbishment, education, marriage, health and many other reasons that are not possible in your current budget.


The Big Question

This brings us to perhaps the biggest question that needs an answer. That question is- Is it worth taking a loan for vacations if it is paid back? The answer is NO. A loan is meant to make funds easy in the pocket but not for entertainment purposes. A loan should only be used for productive reasons and a vacation is not on the list. A loan should only be used for buying a commodity like house, car or to pay a big utility bill.


Point to Consider

One should consider taking a loan only if it is really required. After all, there is no sense in paying interest for a long period, unless required. If you still need to take a loan, do consider the below questions:

1- Who can get a loan: Generally, as long as you can pay the loan back, you're eligible. Even a minor can under guardian supervision. A bank makes a decision according to your monthly income. If you are taking from an outsource, then it depends on your income or what you are keeping against the loan, like a loan against gold or property.

2- Rate of interest: Usually the first place to take a loan from us the bank you have an account with. Though this seems like the best way to avail a loan, still if you do a little research on other possibilities like online possibilities, is not a bad option.

3- Suitable EMI: If you avail a loan from the bank, the EMI is set basically according to the monthly payment you have with you after deducting any taxes like income tax etc. A suitable EMI deduction for you should be 10% of your monthly income so you still have an adequate amount of money for other bills and expenses. Hence, a little money management can help you increase the EMI to 30% and clear your loan sooner.

4- Loan Against Property/Gold: Loan against property or gold is given on part of the full value of the property or gold. Say your gold item is 15,000. You can easily get a loan of 10,000 on it.

Is It Good To Take Loans?

This is the most important question that people have always asked me; personally, I have never taken loans because I find them to be extra responsibilities on the shoulders. Even though you get the money, it is not yours. No doubt you feel good when you get the money just when you need it, I can't be sure of how it feels when you are unable to repay the amounts.

Now - if you ask me whether it is good to take loans or not; I say it depends on what kind of a situation you are in, at present. Here are some of the situations in which you can thank all those probate cash advances concepts:

• If someone is unwell and you need money to save his or her life, taking loans is a good thing. After all, it is your responsibility to make sure that all your loved ones are healthy and fit enough to live for long. If you want to save someone's life, you can surely go for a particular amount of debt.

• There are times when you need loans for further studies. If your parents can't afford your education and your job is not good enough for you to save enough funds for your education, loans can help you. Besides, when you study well and get a better job, you can repay the debts (depending on the terms and conditions of the loan providing firms)

• If you have been inherited with a huge amount of money or property, you are free to take loans. No irony; you have the concept of probate cash advances, which allows you to borrow money against the amount you are going to receive in future.

• There may be some urgent situations in your life due to which you need money immediately. For anything that doesn't hamper your future, borrowing money from a legal firm is okay.

Now here are some of the things I tell people not to take loans for:

• Some of my friends asked me if it was logical to borrow money to make their weddings extra special; I straight away told them not to get into the circles of debts. It is okay to have a simple wedding, rather than having a BIG FAT ONE and then being under debts.

• If you think being under debts for your addiction is good, you know nothing about the way loan providing companies behave in future. They even have rights to get you arrested, if you don't repay money!

Golden Rules to Always Borrow Loans Like a Boss

In an ideal world we all would like to have enough money for each of our requirements; wherein there is never a need to visit a lender to meet the cash gaps. It sounds too much of convenience and happy living. Isn't? 

However the reality is not that sweet and most of us have little choice in the financial matters. We have a multibillion lending industry thriving on the vast gap between the consumer needs for credit, after all.

With the advent of FinTech industry it has become easier than ever to borrow the required funds, say, in a matter of few hours you can avail loans of your choice. Many lenders even boast off to extend the financial assistance instantly (within a minute) too! The service and processing is as hassle free as it can get today.

Although the channels for borrowing have mushroomed to abridge the walls between lenders and borrowers, the basic rules for applying a loan are broadly the same. You should never borrow more than what you need; and ensure loan affordability at the same time. Here is a quick list to state 5 absolute rules for choosing a right loan so that you are never enslaved by a debt in your lifetime.


1. Borrow according to your repayment capacity


Whether you are a Christian or not, it is not about a belief in faith; it is pragmatic to not borrow beyond your means. Always raise a loan after assessing your repayment capacity. Borrowing more than permissible credit limit or borrowing more than 50 per cent of your income hurts your credit score and credit worth.

In the present time it is not uncommon to borrow despite a low score as a lot of loan offers are always available. Irrespective of loan availability you must strictly borrow if you need one.

2. Try to borrow for short-term; do not borrow for longer term unnecessarily

While it always advisable to ensure the affordability or ease of payment of the loans, you must at the same time ensure that you are not extending the payment duration simply to keep the instalments low. For, larger would be the tenure; greater would be the cost of loan. 

While raising a loan you must try to save as much on the loan interest as possible. In case you have temporary fund hassles, you can begin the loan with small instalments; and later on, either prepay or refinance the loan to save the additional payment of loan interest amount.

3. Be disciplined in loan repayments

One of the most common reasons to destroy one's credit score is to delay the credit bill repayments. A lot of people realise the mistake after a loan rejection. It is thus advisable that the sooner you automate the loan repayments and credit bills the better it is for your credit health. 

Also you may deliberately align the same repayment date for a number of accounts so that there are lesser hassles to manage the repayment date. Always keep in mind: A single day delay is same as a week's delay. It is thus important to pay before the deadline lapses.

4. Try not to borrow for investment or unaccounted risks

Loans should not be directed to pay for investments or volatile risky payouts. For, it is a liability that must be returned on time with loan interest amount. So loans are not meant to fund your fixed deposits or equity funds. Also, it is important to think critically about the loan purpose as a debt should always be used for significant reasons in life.

5. Keep a tab on your credit report

Once you apply for a loan, it is important to keep a strict vigil on your credit report. You must look for ways to increase your score. In case you are running a rolled over credit bill for a few months, you must first of all clear the balance on this card. It would save enough on the interest component.

Similarly if you have multiple loans running simultaneously consider consolidating your debts and reduce your monthly debt burden. Herein you can also consider using an experienced loan broker's advice to use cheaper loan alternatives such as a secured loan against property or a homeowner loan to reduce your monthly debt repayment burden.

Keeping all these factors in mind, as you assess your credit health and apply with confidence, your loan application is bound to be accepted, making you a boss of your own financial decisions!

8 Conditions Which Can Result Into a Loan Rejection

Getting a loan may change someone's life. But if an application is rejected, the dreams are shattered. And a single rejection leads to problems in the future. Though everyone fears a rejection on a loan application, only a few know the conditions due to which an application is rejected.


Bad Credit Score

Credit Information Bureau of India Limited (CIBIL) shares the credit details of an individual with all the financiers. These details include information on a borrower's present and previous loan transactions. Banks provide all the credit information on all the borrowers to the CIBIL. Using this information CIBIL creates the CIBIL TransUnion Score and the CIBIL Score. CIBIL awards score based on the assessment of the information provided by the banks. The scores are given in the range of 300 and 900. Banks call for a CIBIL report as soon as a person applies for a loan.


Previous Defaults

Banks draw their own list of defaulters and this information is available to all their branches. This information is looked into when a person applies for a loan. This information is used in addition to the CIBIL Score and the credit report provided by the CIBIL.


Loan Guarantor

Sometimes people become a guarantor for the family members or friends. And if someone is a guarantor in case of a default then this poses a problem. The CIBIL report will show the person as a defaulter for the loan, even though the person was only a guarantor. 

Some will feel that this is not fair but that is how the system is. So one should be very sure while giving his/her name as a guarantor.


Too Many Loans

While lending money to an applicant the banks will add all the existing outstanding loans from all the banks or NBFCs. This helps in determining the amount an applicant is eligible for. Then the ratio of loan to income is calculated by the bank before extending a loan. The total monthly deductions should not exceed 50 per cent to 70 per cent of the take-home or gross salary.

Job Stability

An applicant's job is an important factor too while lending the money. If the person changes job very frequently and the location too, it might be a negative point when applying for a loan. A stable employment record is very favorable when applying for a loan. 

The banks will have a positive outlook for people with a stable track record. The loan is given based on a good employment track record This gives the idea of stability in one's life to the bank.


Tax Record

Banks make a thorough assessment of a tax profile by asking for the ITR copies of previous years including tax deducted at source/professional tax paid against the salary in the past. Not providing such information may lead to problems. So it is always best to obtain the income /Form 16-16 (A)/ certificate/TDS certificate from the employer.


Loan Rejections

If an applicant has been rejected in the past, the chances are high to be rejected again. So, one should be really sure while applying for a loan. It is better to check the CIBIL Score before applying. This gives a good idea of one's probability to get a loan. Only apply when you are sure to get the loan.


RBI Defaulters/Willful Defaulters Lists

The Reserve Bank of India, RBI maintains a list of the defaulters. This list is updated by asking the bank to provide it to the RBI. The willful defaulters' list is uploaded on the RBI's website. The willful defaulters' is the list of people who deliberately attempt to mislead the lenders in spite of adequate net worth.

Tips for Faster Processing Of Your Bank Loans

Are you also among those facing a tough time getting your bank loan approved? With economic recession increasing at an alarming rate the bank lenders have made money lending policies more stringent. Thus, your application should be spotlessly perfect to avoid any doubts in the minds of the investors.

So, if you want lenders to review your application and grant it without creating any problems, then these guidelines should be kept in mind.

• Know your preference well: Before making a move to the bank with your application it is advisable to check all the loan options available online which are being offered by other rival companies. This would give you an idea of what kind of loan you are looking for, whether its terms and conditions are feasible for you, and time for repayment which should be as short as possible.

 If you are looking for some specific type of loans like an auto loan or mortgage loan then do a research work on all the deals available to get the best deal. Nowadays, you also keep getting many email notifications about several types of loans. However, one should be very careful to read its fine print properly before further proceeding with it.

• Question the bank for clarifications: Once you find the loan whose terms and conditions suit you best, you should directly get in touch with the bank officials to understand their requirements for a quick approval of the loan. 

As different banks have different criterions required for approval, so do not hesitate to make a prior appointment with the bank and do not forget to carry all your official documents for them to cross-check and verify.

 Get a clear idea about the necessary documentation requirement for the approval process so that you do not have to face any problem at the last moment.

• Know your limits: Tally your current credit scores with those required by the bank because most the lenders focus on your credit history before approving the loan. If there is any discrepancy found in that then your chances of a loan approval almost become nil.

• Checklist for required documents: Create a checklist of all the necessary documents required so as to avoid any discrepancy in the documentation process. Sometimes incomplete applications get rejected without getting reviewed, so make sure you submit all the documents.

• Get a clear idea about how things follow: Get to know how thing are processed after the submission of the application so that you know exactly when you would get a response.

Since getting approval for a loan is a very critical task, these above-mentioned tips would help you get approval for your loans more quickly.

Top Ways To Manage Your Loans

Trust me when I say this - loans may seem blessings to you, but they are curses in disguise! Just when you enter the circle of a loan, there are thousands of things that keep irritating you at the back of your mind.

Unless you have opted for an inheritance loan company and have taken loan in advance (against the inheritance you are going to be blessed with, in a few days), managing the debts can be quite difficult.

But worry not - here are some of the tips I would like to give you to balance your life, even with all those debts on your head:

Don't panic: The first, and the most important thing, that you need to remember is not to be panicked at all. No matter what happens or how bad the times turn, remember that things can be better, if you plan them in proper ways. Keep a backup plan ready for every single step you take, with respect to the debts you have on your shoulders.

Don't spend all the money at once: Just because you are going to get the inheritance in a few days does not mean you can spend all the debt you have taken. First of all, you haven't received the inheritance yet and the money that you have taken in advance is nothing more than a debt at the moment. Therefore, be careful before spending all the money that you have borrowed.

Save first to have sufficient funds to return the money: Instead of spending first, save first to have sufficient money to return in future. Your savings should be so strong that you can repay the debts, even if you don't get the inherited amount in your hands.

Make sure you WOULD get the inheritance: There are certain ways in which you can find out about the truth behind the will of your deceased parents. Make sure you are going to get the inheritance, before you spend the money completely. What if you don't get it and you have to return the debt on your own?

Remember to spend wisely: Instead of spending money without thinking, make a plan. Find out the reason behind why you took the loan. Spend money according to the plan, instead of spending it without a thought.

Think about the things you would do, if you don't bang the inherited amount or property: You need to make sure that you have a proper plan ready in your head, to repay the debts, if you don't bang the inheritance that you are expecting in a few weeks.




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