Business News Desk -Easy availability of loans has made it easy for people to fulfill their dream of owning a house and a car. But, if carelessness is taken in repaying the loan amount, then the risk of the person getting trapped in debt increases. If you are planning to take a loan then you have to keep some things in mind. With this you will not have to face problems later.
Understand fixed, floating and APR
While taking a loan, it is important to first understand the interest rate. Whether the bank or NBFC from which you are taking the loan is giving the loan at fixed rate or floating rate. Also, how much money you have to pay as interest on this loan. In fixed interest rate loans, the interest rate does not change throughout the tenure. Floating rate means that the interest rate can change during the loan tenure. It is also important to keep in mind the Annual Percentage Rate (APR). Many times the loan APR increases due to processing fees and administrative charges.
Don’t misjudge the loan cost
Many people who take a loan are not able to estimate its cost correctly. If you are taking a loan to buy a house, car or to start education or business, then definitely estimate its cost correctly. This will ensure that you do not face any problems in repaying the loan. Many people miscalculate the cost, which directly impacts their financial planning.
Choose your repayment schedule wisely
Many people choose an aggressive schedule for loan repayment. This affects their essential expenses. Therefore, it is important to choose a loan repayment schedule keeping your financial situation in mind. You can choose the repayment schedule keeping in mind the future growth in your income. You should also understand the rules related to bank foreclosure. Sometimes 5 percent foreclosure charge is imposed. This reduces the attraction of repaying the loan prematurely.
Plan your loan quickly
Many people delay in planning a loan. The sooner you take the loan, the sooner you will be able to repay the money and close the loan account. Financial experts do not recommend taking a home loan at an older age. This makes the loan a liability. If a person is 30 years of age or slightly older, he can easily think of taking a loan.
Don’t stop saving and investing
Many people stop saving and investing after taking a home loan. This means that you lose the opportunity to get good returns on your investment in the long run. Merely repaying the home loan will not take care of your post-retirement expenses. For this you will have to save and invest regularly. Therefore, along with paying the loan installment, also use some money for investment and savings.
