A lot of times, people tend to avail a higher loan amount only to struggle with the repayment in the long run. This happens because of insufficient planning.
Today, the financial institutions in India offer a wide variety of attractive services like a quick approval process, minimal or no application fees, competitive interest rates to attract new borrowers. For instance, you can apply for a mortgage loan, and you may get the amount in your account in about 15-20 days. The lenders may also promise you several other attractive terms. But, before you sign the loan document, make sure that you are borrowing for the right reason from the right lender. Here are a few basic rules you must follow while applying for a mortgage loan.
Keep the EMI affordable
A smart borrower will never apply for a loan that he/she cannot repay. The EMI should fit within your monthly budget. While determining the loan amount, you must remember the thumb rule, which is – the EMI should not be more than 15% of your income. You can use the EMI calculator to determine the maximum amount you can afford to pay as EMI. If the EMI is not affordable, you may be forced to compromise on other important financial goals like saving for retirement or investing in mutual funds.
Keep the tenure optimal
While applying for a loan, you should choose the loan tenure that gives you an affordable EMI keeping into consideration your present and future financial liabilities.
Avail insurance for the loan
Taking a loan is a great way to purchase a home. But if something untoward happens to you, and you fail to repay the loan, the burden of repayment will fall on your family members. Also, there is a risk that the lender may take over the property. To avoid this situation, you must take an insurance cover for your mortgage loan. There are different types of insurance plans for loans. You can choose a single premium plan or a monthly premium plan to suit your needs.
Don’t ignore your other financial goals
For most people in India, buying a home is one of the most important life goals. Although it is essential to buy a home, you must not jeopardise your other financial goals like building a corpus for retirement. You must not spend all your savings to fund the home purchase, you can easily avail a loan, but you can never get a loan to cater to your retirement needs. Besides, availing a loan will also inculcate a sense of financial discipline, and you would be much wiser with your spends as you would have the pressure of repaying the EMIs.
So, now that you know the basic rules adhere to them and have a happy borrowing experience.