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WHAT RULES TO FOLLOW WHILE GETTING A LOAN?


Getting any kind of loan can be a significant decision, so it’s always important to make a smart and wise decision. Most of the lenders have tightened their rules on borrower selection and the loan quantum that can be disbursed. Every lender has different set of criteria to decide maximum permissible finance. To proceed on the loan processing, you also have to follow some rules while you "Apply For Loan" that will help you to make your loan journey stress-free which are mentioned in this article.

Timely repayment: Your loan repayment should be disciplined to ensure the lender to be risk free so it’s important not to miss a loan EMI. If you miss or default on EMI, it can adversely affect your credit score which will reduce your chances of securing a loan in the future.

Repayment capacity: Always take loan money that you can repay easily. Your monthly installments for your entire loans should not exceed 50% of your monthly income or budget. To illustrate:  If your monthly income is 70,000 then your total EMI should not exceed 35,000.

Fix a short tenure: Longer will be the tenure, the bigger is the interest burden on you. Therefore, keep the tenure short to lower down the interest rate. To exemplify, if the interest rate is charged up to 57% on the borrowed amount in 10 year loan, then the interest will raise to 128% if you opt tenure of 20 years.

Get insured for big ticket: Most of the financial experts advise that big-ticket borrowers should take some insurance cover equal to the loan quantum. Moreover, insurance policies linked to the loans are usually single premium plans but the plans having regular payment are the better way to insure yourself.

Use partial Pre-payment: It is good to make loan payments in large chunks to keep your interest payment low. So, whenever you receive some salary bonus, gain some profits or returns from your investments to make a pre-payment on your loan. Making a partial pre-payment brings down your total outstanding dues as well as save you from shelling out additional money for interests.

Switch lenders for better interest rates: If some other lending institute is offering better rate than your current lender, it makes sense to switch your loan with other lender considering the processing fee.

Pay an extra EMI: Try to pay an extra EMI every year that will pay off handsomely in the long run. Generally, there is no prepayment charge for floating rate term loans. Paying an extra EMI can reduce your overall outstanding principal amount as well as it will have a great impact on your credit history.

Terms and conditions: Some of the lenders are notorious for slipping in clauses that could be against the borrower rights. If you are unable to understand the terms, get a financial advisor to take a look at the loan agreement before you "Apply For Loan Online" or offline. It is advisable to read the terms carefully to avoid unpleasant surprises.

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