10 Important Rules You Should Follow before Taking a Loan

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Not all of us in this world have the financial fluency all the time to fulfill certain needs. So, we borrow money to meet the goals we have set for ourselves. Here come the government and private banks which showed us the opportunity to lend money from them in exchange of returning the amount along with certain interest rates.

As technology progressed so is the lending infrastructure. Now from online cash lenders people can get instant cash loan in 1 hour after getting approved for the loans. Banks take a bit more time to sanction a loan.

You must know the 10 important golden rules before borrowing money to stay away from the enslavement of money lending-

1. Never Borrow More Than What You Can Repay

Going beyond your need and also what you can repay may put you in big trouble. Take a loan which you can repay easily and won’t have any stress to repay. It is very important to consider your loan-to-income ratio.

2. Take Loans for Shortest Tenure

The more years you add to your loan tenure, the interest rates become higher. People fall for these when they with longer tenure the immediate EMI rates are low. It is best to take short loan and only for needful time.

3. Repay Regularly and Timely

Create a discipline to repay regularly and timely, no matter how short or large the amount is. Delaying or missing an EMI will make huge impact on your credit score for the future.

4. Never Borrow to Invest or Splurge

One of the top rules is never take a loan to invest. Investment rates may vary with your EMI rates that you have to pay regularly.

You also must not take loan to spend on unnecessary things like for traveling, shopping etc.

5. With Big Loans Take Insurance Coverage

When you are taking any car or home loan it is best to take up insurance for the big loans also to ensure that your family is secured from any unstable debt if any accident happens.

6. Take up the Best Rates

New rules and interest rates change which will present you to some best rates for taking loan. If you get a good offer as early as possible then take it.

7. Go Through and Understand All the Legal Terms

Do thorough reading of the legal documents. You must also understand the meaning of each word and sentence before signing the document to prevent any legal issues.

8. You Can Substitute Your High Cost Loans

Instead of having many loans you can opt for one big low-cost loan to deal with all the necessities. Don’t take various loans to get offer on tax benefits.

9. Assess Your Own Future when Taking Huge Loans

Make plan for your life after retirement along with your children’s future to have a secure life ahead when you’re taking a big loan.

10. Discuss about Taking Loans with Your Family Beforehand

It is very crucial to discuss with your family about the loan you are planning to take. It will keep everyone aware of the overall financial impact, the loan will bring with it.