Technology and digital interventions have made it easier for lenders to bridge the gap for borrowers between what can be paid and what borrowers aspire to.
With loan apps and online platforms, the lending market has taken a new approach to lending, in which people no longer have to wait by saving little by little before making a big purchase. or a large expense, or even waiting for a loan approval. It is simply available instantly in a few hours or a day.
Experts say that with such easy access to credit, borrowers who took the process for granted are turned down for further loans from NBFCs and instant loan providers, due to their poor credit rating and track record. credit.
If you are also one of those who use these instant money providers or plan to use them, there are ways to borrow money to avoid being rejected for loans in the future.
Avoid borrowing for impulse purchases
Don’t borrow with high interest rates just for shopping. Emotions play an important role in making purchasing decisions, which marketers around the world are exploiting through advertisements and promotions. Hence, it is advisable not to borrow for discretionary expenses. Keep in mind that doing retail therapy with borrowed money is not the way to go.
Amount to borrow
To get started, don’t borrow more than what you need and can repay. When borrowing, note that your overall EMI expenses do not exceed 50 percent of your monthly income. Based on your monthly income, if you want to know what your EMI expense should be, you can use an EMI calculator to find out the monthly EMI you could pay, before you take out a loan.
Short loan term
It will look like a good deal at first you will have to do smaller IMEs every month but lenders / banks do this to offer longer loan terms. With longer tenure, the interest also ends up being higher due to the period. A long term means a higher interest payment.
The penalty or additional interest in total turns out to be a huge amount, which might otherwise have been saved if you had paid your contributions on time. Missing payments may not seem like a big deal, but they have a direct impact on your credit score and ruin your chances of getting a loan in the future. If you have ongoing debt, experts say, don’t compromise on debt repayments and save or invest.
Take advantage of tax advantages
The government offers tax benefits on loans, such as home loan tax deduction under Sections 24 and 80EE of the Income Tax Act, interest paid on student loan is also fully deductible . If you are one of those people who are trying to impose benefits by availing the loans, experts say, it does not make sense to keep the loan outstanding just for tax breaks. On the other hand, try to compare the actual cost of the loan with the returns you could earn if the amount were invested.