Thursday, 29 June 2017

How much loan can one afford?

There are different loans in the market to offer by banks and Non-banking financial services suiting to your needs. If you want to buy a car there is auto loan or buying a house you can opt for a home loan but the question is how much loan can one afford? Due to a lot of options available in the market in terms of loans, loan discounts and offers one can easily avail a loan and fulfill their needs, whether it’s a luxury of buying a car or a need of a home to survive well it completely depends on your earning potential and your cibil report. When loans are easily available people tend to take more than what they need and that leads to bad repayment structure and bad cibil report.
There are some points one should consider before applying for a loan and save the hassle of over paying EMIs for something which you never needed on the first place:
Income
One should always try to consider all the income and gains before applying for a loan, sanctions of different loan is directly related to your income(s). To calculate your eligibility you can check out various EMI calculators available online and check what EMI amount you can afford. There are different norms of calculations which banks follow for sanctions of loans.
For self-employed personals the loan amount is considered on the net profit and for salaried individuals it’s on the basis of gross salary.  Calculating the affordability can help you in a long run while you are opting for a home loan for let’s say ten to fifteen years.
Expenses
There are different types of expenses in everyone’s life. For some it is all about luxury but for some it’s a matter of survival. While calculating the affordability always jot down your fixed expenses like grocery, electricity bills, utility and so on and also your luxury expenses like dinner in a restaurant, and so on. When calculating your affordability you need to understand that you will have to cut on your luxury expenses that that you opt for a maximum amount of loan always stick to what you need and try cutting down luxury expenses.
 Try not to opt for a credit card and if you have one try not to use it everywhere. Not many people understand using a credit card is like trapping yourself into a never ending loop of expenses you won’t be able to evade. We use credit cards for all our luxury expenses and what we don’t realize is we have overspent for what we don’t need understanding. We have a lot of credit limit to spare, but we will have to pay that amount after fifty days, so we try converting our transactions into EMIs which leads to more burden and are paying interests for what we never needed on the first place. So spare yourself with this nightmare and never opt for a credit card if you would be spending recklessly.

Cibil Report
As mentioned earlier your cibil report will play a vital role for you getting a loan. When you don’t pay your dues to the banks on time your cibil scores go for a toss. But why does this happen on the first place? lifestyle is something which everyone follows according to their own affordability. If your incomes are great, your lifestyle will be but if your incomes are not that good and you are looking forward to live a lifestyle which you hardly can afford; makes you take a lots of unnecessary loans which leads to pileups of EMIs which you can’t afford and bounced EMIs which will lead to bad cibil report. Also, you cannot avail a necessary loan when needed in future. There are some NBFCs who provide loans for low cibil scores as well, the criteria these firms follow are different from traditional banks but you will have to pay a slightly high rate of interest.
Take Home :

One can easily afford a good amount of loan if the individual is ready to adhere the integrity of paying bank dues on time and maintain a good cibil report, but don’t try cutting down the chances of getting a loan for temporary luxuries and feel sorry later. 

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