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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.
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People develop their lives around their ambitions. Whether it is purchasing a new house or expansion of business, these goals motivate people in their lives. But, not everyone has the financial capacity to achieve such goals and that is why some opt for loans. Borrowing enables you to afford those things which seem out of reach. If you too are planning to get a loan to buy a car or house, then let us tell you about the importance of being a responsible borrower.
Whether you are taking a loan against property, or simply borrowing from the bank, you must maintain a healthy relationship with the lender in order to build your credit for next time. Here are five tips to become a responsible borrower:
Gaining the Trust of the Lender
Lenders strictly provide loan to those individuals who they find trustworthy. To determine that, they run various backgrounds checks on them. They check credit history and credit score in order to determine your repaying habits. Therefore, develop a clean credit history so that the bank would be able to trust you while lending.
Being Punctual while Repaying the Loan
When you borrow a certain amount, you are obliged to pay the EMIs on time. You can focus the cash flow towards repaying the loan. When you take any kind of a loan, say a property mortgage loan, you are required to be punctual while repaying it.
In case there is a cash crunch and you are not able to pay the EMI on before decided time, you need to inform your lender about the situation. If they are convinced, they make a required adjustment so that the delay won’t affect your credit rating.
Providing Security while Borrowing
When you need a considerably huge amount as a loan and you are not eligible for that amount, you can use the option of mortgage loan against property to obtain the required amount. This way, the lender will have a security of your property and you will be able to get the financial assistance. Loan against the land may also help you to get lower interest rates from lenders.
Using Alternate Sources of Income to Repay the Loan
Moreover, while repaying the loan, you can do a part-time job in order to increase your income. You can direct these extra funds towards repaying the loan. You can also use your annual bonus to make lump sum pre-payments. Also, many people use their investments such as fixed deposits, etc. to repay the loan before time.
Considering your Financial Capacity
This is the last, yet most important thing that many borrowers ignore. These days, financial institutions are competing with others for customers. So, in order to acquire a customer, they may provide a loan easily. Many people get a loan but do not consider their repaying capacities. As a result, it becomes extremely difficult for them to pay the EMIs. In order to avoid this, you must consider your income and repaying capacity while getting a loan.
Being a responsible borrower awards you in two ways. First, is simplifies the entire repaying process, and second, it reflects positively on your credit report which becomes handy for your next loan.
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