Even though technology has made it increasingly easier to avail of a loan yet the fundamental rules of borrowing have not changed over the years. While there are fewer rules when it comes to a small loan amount, the basic documents remain the same. You should be aware of these rules and apply them accurately for easy disbursement.
What to know while applying for a 2 lakh loan?
While there are many ways of applying for a 2 lakh loan, a few key things should be kept in mind by all borrowers while applying for the same. To save yourself from debt enslavement, one must know the following things while applying for a loan:
1. Opt for the shortest tenure possible
All prominent lenders offer prolonged tenures stretching over years for personal loans. Longer tenures seem tempting and appealing because they come with low EMIs, and so potential customers go for longer tenures instead of shorter ones. However, what many borrowers fail to realize is that longer tenures usually mean more interest. This is described as “negative compounding”. The longer your tenure is, the more the bank will earn from you as compound interest. In simple words, the interest outgo is higher with long-term loans than short-term loans, so you must carefully select the tenure while applying for a 2 lakh loan. If your current financial status can allow you to pay a higher EMI, it is always best to pay off the loan as soon as possible instead of prolonging the tenure by paying smaller EMIs and higher interest. You can apply for 2 lakh loan here and get your amount easily without any delays.
2. Do not take a loan to invest or splurge
One of the most fundamental rules of both investing and borrowing is to never utilize borrowed funds for investing or splurging. Investments, no matter how safe, always involve some extent of risk. Investments that seem extremely safe like bonds and FDs usually don’t match the interest rate you’ll end up paying on a loan. Other investments which offer higher rates of return involve an element of risk. So, if the worst happens and the market declines, you might end up with losses and an EMI on top of that.
On the other hand, with the easy availability of loans, it might seem like a safe bet to apply for a 2 lakh loan to sponsor a travel holiday, a lavish party, or a luxury watch, but experts recommend against it. If you wish to splurge like that, you must start saving instead.
3. Research well to find a well-suited loan
Banks and other lenders try to lure in potential customers by claiming that they have the best loan offers at present, but they’re infamous for being financial jugglers as well. If you are applying for a loan, one of the foremost things to do is to research the market. Analyze the interest rates prevailing in the market to find the deal which suits you the most. If you fall for the first offer you get, you are likely to miss out on better deals that could come your way. The key here is to not rush while applying for a loan, but instead to choose the lender carefully.
4. Never contact too many lenders at the same time.
Even though it is important to research and know the market well before applying for a loan, a borrower should not contact a large number of lenders at the same time. Doing so would earn the borrower a reputation of a thirsty creditor which would not only harm your credit score but also prevent you from getting a good deal. To avoid coming across as a credit-thirsty person, you can use loan aggregators’ websites to find better deals for your 2 lakh loan.
5. Do not let your family go out of the loop about the loan
It is always a wise idea to discuss with one’s family before applying for a loan. Since the loan repayment is likely to affect the overall financial status of your household, it is important to keep your family, especially your spouse, in the loop about the loan. They must know about the loan as well as your plans regarding the borrowed funds.
6. Pay attention to the foreclosure rules
A prepayment penalty is a cost the borrower has to pay if they repay the full amount of the loan before its maturity. Lenders usually charge this penalty to not lose out on the interest they anticipated from the funds they lent to you. If you are applying for a 2 lakh loan but you expect your financial condition to get better shortly, it is wise to pay attention to the foreclosure rules while applying. By applying for a loan with the lowest foreclosure penalty, you can save yourself from some added charges.
Availing of a loan in case of an unexpected circumstance can be stressful and intimidating, so it is always important not to rush. Make sure to read the fine print on the loan documents to find the best deal for your loan and save yourself from unwanted debt enslavement.