What to see when going for a loan?

Money may not be readily available to meet the necessities. It is not bad to go in for loan or hand loan in case of emergencies, provided we carefully assess our ability to repay the loan. Financial experts say that problems can be avoided if the order of priority of our financial needs for meeting situations like urgent, pressing, for fulfilling a wish and for luxury are properly analysed. 

*It is good to go in for a loan for progression of assets like purchase of plot, gold or making similar investments. Children’s’ education and performing marriages come under this category. For such events, if sufficient money is not available handy, there is nothing wrong in going for a loan. Some other unnecessary events like having dinner in a five-star hotel, purchasing costly costumes for which simply because immediate payment need not be made; Credit Card can be used … these are also loans. When it is a situation necessity, it is OK, but it is dangerous when it is thought of as extreme necessity.

* Suppose, a thought has crept into your mind for purchase of a house. First, you have to take into account the amount of money you readily have, your employment potential, the salary you are getting, the amount you wish to get as loan from the bank, the rate of interest, the period of repayment, whether you will be in a position to repay the loan installments after meeting the other necessities of your life … only after assessing and analyzing these points, then only you have to start for searching for a house. It would be a blunder on your part for going in for any amount of loan simply you liked a house and are prepared to spend any amount for it.

*Any type of vehicle … if you wish to purchase it by taking a loan, first assess the need to have it. It is a depreciating asset and therefore first, assesses its need for you and it is always better not to go for it till it is considered essential.

*Taking loans for children’s’ education is not a mistake. It is an invaluable future investment. Further, Income Tax rebate under Section 80 of IT Act is available for it. If the educational loan amount is less than Rs.4 lakhs, rebate in interest or waiver of the entire interest will be available, subject to some conditions.

* Always keep a distance from taking unsecured personal loans and loans with Credit Cards. Heavy interest rates will be charged for them. Unless it is for life saving purpose, it should not be availed of. Loans with zero per cent interest with monthly installments facility for purchase of household utensils are available; go in for them only after you get fully acquainted with the conditions, including hidden conditions.