Borrow money is not a good idea for some finance guru but we need to do it to have something. It is imperative that you borrow smart if you want to maintain your financial stability. Loans are most commonly used for the followng :
Okay, maybe some of us said that they need loans for wedding ceremony, investment. Okay, that’s also good as long it won’t bite if you can’t commit to pay it. With any loan, you should consider several factors, including the interest rate, additional fees and down payment. This is some important term that you need to know when apply for loan :-
The interest rate
– It is the amount you are charged to borrow money. When money is borrowed you must repay the principal (the amount you borrow) and the interest that accrues during the life of the loan.
The higher the interest rate, the more you will pay. Interest rates may be fixed or variable
a. Fixed interest rates will remain the same throughout the term of the loan.
b. Variable interest rates will periodically adjust as a result of current market conditions.
Additional fees may be charged
– Some loans include this charged. Prior to accepting a loan, make sure you understand the payment requirements and all of the fees associated with the loan. It is important to know exactly how much you will be expected to pay.
– It is a large payment amounts paid toward your purchase. Down payments minimize the amount you have to borrow. The more money paid up front toward the purchase the more money you will save over the life of the loan.
Here are some additional guidelines to help you detemine whether or not to borrow money :
– Housing expenses should not exceed 33 percent of your gross income.
– Loan installment payments should not exceed a combined total of 20 percent of your gross income.
– remember to save money and have at least 6-12 months of emergency savings.
When making a decision to make purchase add the new payment amount into your monthly budget. Consider the guidelines when inserting the figure for the new purchase.
Source :- Mapping Your Future