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WHAT TO ASK YOURSELF BEFORE APPLYING A LOAN?


At certain point of life, everyone needs to take a loan to fulfill the financial needs. However, it is boon for people who want to tide over the financial crisis but sometimes it can also lead to a debt trap. Therefore, it is important and would be a great idea to ask yourself some questions before you "Apply For Loan". These questions to yourself will clear your doubts about the need of loan and how you going to repay it. Let’s have a look on some of these questions:

What is the need of loan?

First and foremost, you must ask yourself about the purpose of loan that either you need it for building a home, pursuing a higher education or learning a new skill, as it is perfectly fine to secure a loan to pay for the purchase. These assets will enhance in value and helps you generate the income in a long run.

On contrary, if you are availing a loan for your personal expenses which are beyond your means then it would not be a god thing to get a loan. However, if you really want a loan for personal expenses like buying a car or any other electrical appliance needed in home, then you can go with a Personal Loan after finding a reasonable interest rate.

What is debt to income ratio?

It is necessary to understand that debt to income ratio is the part of monthly earnings that is utilized to repay the EMIs. One must know the proportion of income required to repay the EMIs every month. If the ratio comes out to be less than 30-40% then it would be good idea to take a loan.

Should I opt Credit Card loans?

The credit card loans should only be opted if you are confident about repaying them easily. As everyone knows these card loans are most expensive loans with an interest rate of 30-40% annually. If you manage the credit card loans wisely then they can help you in building a good credit score that could be useful in future to secure the other loans.

What is a debt trap?

If you already have an existing loan then securing a new loan will become vicious cycle which needs to be avoided. The early signs of debt trap include the DTI ratio getting more than 50%, maxing out the card limits every month, inability to save money every month. Keep check on these warnings, if you would not fall into debt trap then go for a loan to fulfill your needs.

Should I go for zero interest loans?

Some of the lenders offer zero interest EMIs to lure the borrowers to sell their products which is most commonly seen for electronic products as well as home appliances. Well, before you "Apply For Loan Online" or offline, you must ask yourself whether there are any hidden charges on loan asked by lender, if no then there is no harm in taking a zero interest loan.

Everyone opts for loan, so carefully observe these questions and apply for a required loan at best interest rates.

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