And you need to ask them of yourself
Whether at a mall kiosk or in your inbox, loans are offered today for everything from the latest smart phone to laptops and even home appliances! While it’s always tempting to take a loan at easy interest rates and terms, we’ve put down the top 5 questions to ask before taking a loan. And guess what, you need to ask yourself these.
Do I REALLY need that loan?
The first step to taking a “to-take-or-not-to-take” loan decision, is to decide if you really need that loan. While a loan comes with a whole lot of benefits such as saving cash in your wallet and meeting immediate expenses, it’s important to remember it’s a commitment that you need to respect and live up to throughout the loan’s tenure.
Can I repay that much, EVERY month?
First ask yourself “Can I meet all my expenses with my monthly earnings?” Then from what’s left, set some aside for savings (recommended is 20- 30%). From what remains, you need to apportion for your monthly EMI and other discretionary expenses. The thumb rule is, take a loan with an EMI a little lower that what you can absolutely afford; so you have a little buffer for a rainy day!
Have I gone through all that TINY fine print?
Yes, there is fine print. And yes, you need to read it all. Taking a loan is a financial responsibility and you need to know that you’re signing up with a responsible lender. Stay clear of lenders who have unfair terms and complicated financial “mumbo-jumbo” language hidden away in the fine print. Ask your loan representative or online platform if you have any queries and sign ONLY on a document you understand and are comfortable with.
Do I need to understand ALL those charges and terms?
Yes. Yes. And YES. Cannot say this enough, but your charges and loan terms are what can make or break your loan. The interest rate, total overpayment, loan tenure, and monthly EMI are the terms of the loan that you should understand and agree to. Choose a responsible lender who explains these well because each of these has implications on your loan repayment. Similarly, understand and ask for details of ALL charges that will be levied on you such as loan processing fee, default charges, late payment fee and fore-closure charge. A responsible lender will be transparent about fees and charges, and will ensure you’re not taken by surprise when your bank account is hit.
Can I make all my monthly payments ON TIME and EVERYTIME?
This is probably the most important question to ask yourself before signing on the dotted line. Skipping or delaying even a single month’s repayment can adversely impact your credit score and hamper your future loans with any lender. If you aren’t sure about whether you’ll be able to pay your EMI on time, every time, then we recommend thinking over it again and only take then loan when you are completely confident. A responsible lender will always prefer that you only take a loan that does not burden you and that helps you grow your credit score.