Golden Rules to Follow When Taking a Loan

Golden Rules to Follow When Taking a Loan

There are many people who are struggling to meet their needs. This can make aspiring for things a bit difficult that it already is. There are many financial institutions out there who can give you the right amount that you pay whenever there is an emergency situation. But, before you take up a loan, it is important that you understand the rules to follow before you can take a loan.

Do not borrow more than you can repay

The first rule of smart borrowing is to make sure to take money that you can easily repay. The thumb rule is to make sure that you do not exceed more than 15% of your net monthly income. Always try to make sure that your loan can match the income ratio is within the acceptable rates. Always make sure that they are in the acceptable rates to help you pay them off immediately.

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Keep the tenure as short as possible

The maximum that a home tenure is offered at is 30 years. Keep in mind the longer the tenure, the lower the EMI which can be tempting. But always make sure that you can take the best loan for the shortest tenure that you can afford. This makes sure that the interest stays the same and do not fluctuate more. The increase in the EMI can dramatically impact your loan tenure, which can raise up to 8-10% every year, which can be quite difficult to find the right proportion.

Ensure timely and regular payments

It is important you are disciplined when it comes to repayment of the dues. The short-debt term can be easily taken from your credit card, but you need to be sure that you can pay for the long term, which can only be done with the help of a loan. If you miss an EMI, you are severely impacting your credit profile which can hinder your chances when you are taking a loan for other needs. Also, make sure that you are up to date with your credit card payment as well.


Don’t borrow to splurge or invest

This is one of the most basic rules of never investing in borrowing money. Try to opt for a safe investment like fixed deposits which can match the rate of the interest that you can pay later. The investment that offers higher returns can make equities volatile. If the market declines, you will suffer losses and can become bankrupt. Real estate would have been a cost-effective investment which can be available for 7-8% and real estate prices which can easily rise to 15-20% when you are trying to buy a property. Try to find a home loan which can cost about 10% which even after the raise will be 4-5% extra.

Always borrow from a direct lender

As tempting as it is to borrow money from someone offering it to you are a highly reduced rate, this can actually get you into a lot of trouble. Loan sharks have been around for many years, they tend to offer you every benefit possible in order to get your attention. Not only are loan sharks illegal in the UK but they will more than likely always have a hidden clause that means you will always come off worse.

It is important to always take out a loan from reputable UK direct lenders such as Lenders that are fully authorised and regulated by the FCA have to still to strict guidelines and always need to ensure that they follow responsible lending criteria.