Dhan Ki Baat Ep 7: Things One Must Not Forget When Taking a Loan

Things that you should remember when you decide to take a loan.

Gaurav Mashruwala 

(Photo: The Quint)

Video Editor: Sandeep Suman

Translation: Srishti Tyagi

Everybody needs money for something or the other. It could be either to buy a house or for medical purposes or even for leisure activities. We generally opt for loan to fulfill our demands. But in haste, we take loan decisions and later regret them.

On this Dhan ki Baat episode, we will discuss something that we do not think about before taking loans. We have innumerable question before taking any kind of loan. Some of them are:

• How much, at what rate and from where do we take loans?
• Should we opt for secured, unsecured loans?
• Should the interest rate be floating or fixed?

We will answer all these questions here.

Remember that loan should only be taken if absolutely necessary. Do not take it for leisure activities.

How Many Kinds of Loans Exist?

There are two kinds of loans

1. Secured loans
2. Unsecured loans

Secured Loans

These are the loans in which the risk factor for the bank is low because banks take an asset, property or gold as mortgage against the loan amount. Unless you return the money, the ownership stays with the banks. As soon as you pay the whole amount, you get a no dues certificate from the bank.

Unsecured Loans

There is not guarantee given for unsecured loans. It generally is dependent on your income and expenditure. Perennial loan is a kind of unsecured loan.

How Much Loan Should be Taken?

Not more than 40 percent to 50 percent of your salary should go towards paying back the EMI of your home loan. You may face problems if your salary reduces or you lose your job, and not more than 20 percent to 25 percent of your salary should go towards paying back EMIs on other loans. This means reducing your loans and not increasing the time period.

Not more than 45 percent to 50 percent of your salary should go towards paying back EMIs for all your loans.

Another important thing, you should have three months of your salary as savings so that it helps you in times of need.

(The story was originally published on Quint Hindi)