Loan an effective tool to fulfil our aspirations, which our regular income cannot afford. Not all loans are bad, but a loan taken without considering your repayment capacity can result in a debt trap. You should thus weigh whether acquiring a loan is the ideal solution or whether you should you wait it out and save instead. Borrowing is a long term commitment, involving repayments for a certain period at a certain interest rate, and has a great impact on your finances. If planned well, loan is a great way to build assets, so make a wise decision by going through these crucial points.
Advantages Of Borrowing
- You can finance your needs immediately
- You can avail an affordable loan with a good credit score
- You need not put off purchases that are likely to be subjected to inflation and increase in cost
- You can avail tax benefits in certain cases such as using the loan for home renovation or for education
- You can build your credit score by repaying it on time
Questions To Ask Yourself When Determining If A Loan Is The Right Decision
- How urgent is your requirement?
- Can you afford the EMIs?
- Will you be able to pay added expenses like processing fees and other charges?
- Are there alternative funding solutions?
- Are you saving money by taking a loan instead of cashing in your investments?
- Can you make prepayments in the future to reduce your interest and tenor?
- Are you getting an affordable deal based on your existing or past borrowing experiences?
This checklist can help you make a smart decision about availing a loan, so your finances remain strong and steady.