If someone wants to take a loan and requests for your advice, you probably are more than willing to help, but do you really know what a loan is, what you should know before plunging into the ocean of loans. Now we all know loans are available for the purchase of homes, consumer electronics, refurbishment, education, marriage, health and many other reasons that are not possible in your current budget.
The Big Question
This brings us to despite the largest question that needs an answer. That question is- Is it worth taking a loan for vacations if it is paid back? The answer is NO. A loan is meant to make funds easy in the pocket but not for entertainment purposes. A loan should only be used for productive reasons and a vacation is not on the list. A loan should only be used for buying a commodity like house, car or to pay a big utility bill.
Point to Consider
One should consider taking a loan only if it is really required. After all, there is no sense in paying interest for a long period, unless required. If you still need to take a loan, do consider the below questions:
1. Who can get a loan: Typically, as long as you can pay the loan back, you're eligible. Even a minor can under guardian supervision. A bank makes a decision according to your monthly income. If you are taking from an outsource, then it depends on your income or what you are keeping against the loan, like a loan against gold or property.
2. Rate of interest: Usually the first place to take a loan from us the bank you have an account with. Although this looks like the best way to avail a loan, still if you do a little research on other possibilities like online options, is not a bad option.
3. Suitable EMI: If you avail a loan from the bank, the EMI is set basically according to the monthly payment you have with you after deducting any taxes like income tax etc. A suitable EMI deduction for you should be 10% of your monthly income so you still have an adequate amount of money for other bills and expenses. Here, a little money management can help you increase the EMI to 30% and clear your loan sooner.
4- Loan Against Property / Gold: Loan against property or gold is given on part of the full value of the property or gold. Say your gold item is 15,000. You can easily get a loan of 10,000 on it.