Money is not everything, but it is something very important. For some, money is a source that takes care of their basic needs, family, education, health, and other things they care about, while for some others, money is about freedom, independence, opportunities, and adventure. Either way, money has always been and will always be IMPORTANT.
Some people have realised that money may not bring you happiness, but it should not be a reason to make you sad either. They believe that if money gives you the power to make a difference in your life, you should have the desire to make money – to save money – and to use it wisely. It is really necessary to think and take wiser decisions related to money.
The last statement is talking especially to you if you are planning to borrow a loan. There are some important aspects for you to consider before going ahead and bagging that loan.
The very first question you need to ask yourself is – What’s the purpose of the loan? – Is my reason big enough to apply for a loan?
Personal loans are made available for genuine needs like marriage, education, or for medical reasons. But, if you wish to borrow money and invest it in the stock market or in commodities that promise a higher return by speculating risks, then it is not recommended as it can lead to a debt trap.
Also think wisely how you intend to repay the loan – are your pockets deep enough to take care of the instalments?
To answer this question, just divide your expenses into discretionary expenses like rent, other EMIs, average household expenses, driver or maid’s salaries etcetera, and non-discretionary expenses like shopping, eating out et al. Whatever loan you take, should not result in an EMI that you cannot service after paying off all your non-discretionary spends. Also, make sure you are left with some buffer cash after paying off the additional EMI and current non-discretionary spends. This extra money will always help you meet unplanned or emergency expenses.
Then the question that begs to be asked is, “Should I go for secured or unsecured personal loan?”
Well, secured loans are comparatively cheaper, but mortgaging your assets cut down the flexibility of encashing or using your asset on your terms. So, for small amounts, it is usually preferable to take unsecured loans and for big amounts, choosing a secured loan is a wiser choice. However, in case you do not have security to offer, the only option is to try and get an unsecured loan.
Also, read the terms and conditions properly while deciding between loans.
Generally, personal loans are repaid over a period of 2-5 years. Some lenders will even include pre-payment penalties for paying off the loan early. So, it is really necessary to read the terms and conditions thoroughly.
The last and the most important step is to study the offers. Check what’s going on in the market. Who are the providers? What are the respective guidelines? In short, hunt for the best deal.
Applying for a personal loan is a process and you may have to go through certain formalities, but getting a personal loan can be a huge relief.