Don’t Let Home Loan Turn Into a Bad Debt
Jun 28, 2017 Home Loan
Times have progressed and so has the market scenario. Now we can afford to buy a property of our dreams by taking the loan from the banks or loan lending institutes. The previous generation lived a debt free life and encouraged the same, but now as the times are changing our society is more acceptant towards the loans. Even the government gives us tax benefits for home loans. According to experts loans should be a part of your financial planning and the planning should be done in such a way it does not imbalances the financial status of the borrower drastically.
Home loans are looked as a good debt while personal loans are often looked as risky ones. But don’t get fooled, the even home loan can turn into a huge nightmare if not planned and carried out correctly. A borrower should pay attention to his or her own income while taking the loan and agreeing on the loan repayment option.
1. Take the loan that you can handle:
Banks give us 80 percent of the loan for the property and rest 20 percent a buyer has to pay from his own pocket. But be careful; don’t let the monthly EMI put you in a financial crunch. It is better to take the loan that you can handle and are able to pay monthly. According to experts, your monthly EMI should not be more than 40 percent of your monthly income but often people go overboard with the EMI to pay it off soon. A huge monthly EMI can put a huge burden on your regular lifestyle and lead to a boring an unpleasant life where you might have to walk away from your hobbies. Such a lifestyle can put you in a bad place mentally.
2. Don’t go for formalities:
Some borrowers take their homemaker spouses as a co-applicant of the loan to take a bigger loan from the bank. This is claims as ‘just a formality’ for taking a bigger loan from the banks and lending institutes. But be careful when you do this. If in future you lose your job, it falls on your wife to pay the EMI, but since she is not employed and unable to pay the loan, your bank may take away your home from you.
This is one of the reasons; it is advised to keep the monthly EMI as low as possible if you are the only earning member in the family. The procedural ‘formality’ might seem as nothing at the time of taking a loan but it can come back to haunt you in later life. Ditch the formalities. There’s isn’t anything formal when it comes to taking the loan from the banks.
Home loans are looked as a good debt while personal loans are often looked as risky ones. But don’t get fooled, the even home loan can turn into a huge nightmare if not planned and carried out correctly. A borrower should pay attention to his or her own income while taking the loan and agreeing on the loan repayment option.
1. Take the loan that you can handle:
Banks give us 80 percent of the loan for the property and rest 20 percent a buyer has to pay from his own pocket. But be careful; don’t let the monthly EMI put you in a financial crunch. It is better to take the loan that you can handle and are able to pay monthly. According to experts, your monthly EMI should not be more than 40 percent of your monthly income but often people go overboard with the EMI to pay it off soon. A huge monthly EMI can put a huge burden on your regular lifestyle and lead to a boring an unpleasant life where you might have to walk away from your hobbies. Such a lifestyle can put you in a bad place mentally.
2. Don’t go for formalities:
Some borrowers take their homemaker spouses as a co-applicant of the loan to take a bigger loan from the bank. This is claims as ‘just a formality’ for taking a bigger loan from the banks and lending institutes. But be careful when you do this. If in future you lose your job, it falls on your wife to pay the EMI, but since she is not employed and unable to pay the loan, your bank may take away your home from you.
This is one of the reasons; it is advised to keep the monthly EMI as low as possible if you are the only earning member in the family. The procedural ‘formality’ might seem as nothing at the time of taking a loan but it can come back to haunt you in later life. Ditch the formalities. There’s isn’t anything formal when it comes to taking the loan from the banks.
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