Research reveals that Indians rarely think through their financial decisions. Let me explain this with the example of availing loans. When it comes to borrowing, the only matter of concern before many of us is the money in hand, not the aftermath. But the thumb rule when applying for a loan is, we should make sure that the our income is sufficient to cover the monthly payments without straining the monthly budget. In an ideal budgeting situation, not more than 50% of your monthly income should go towards paying off the installment of the loan.

When you are unsure regarding you can afford to take a loan or not, you should visit a financial planner or counsellor. Once the loan amount has been disbursed you have very few options to get out rather than paying it regularly. When the concerned loan is third or fourth , or if you need credit to cover your living expenses, in such a situation debt counselling is a must. At the time of loan application, you need to make sure that you fully understand the terms and conditions of the lending institution. It becomes a daunting task when you are faced with an entire docket of paper. In such circumstances most people are tempted to simply sign on the dotted line only.

It’s not not only necessary but also precautionary to go through the whole agreement with a fine-tooth comb and to make sure you’ve got the basics covered. Apart from the interest rate aspect of the loan, foreclosure rate, penalties incurred for late payment and clauses pertaining to changes in interest rate should be taken account before applying for the loan . In my opinion, a loan against property is the easiest and safest option for a borrower. If at any point you are sure you won’t be able to continue with the payments , you should make the bank involved. In such circumstance you can tell them about your inability to pay and sell off the asset to repay the loan.