Can a home loan turn into a bad debt?

Better to go to bed hungry, than to wake up in debt

Times have changed, and so has the market scenario. We can afford to buy a property of our dreams by taking the loan from the banks or loan lending institutes. The previous generation lived a debt free life and encouraged the same, but now, as the time is changing, our society is more accepting towards the loan. Experts have an opinion that debt should be part of one’s financial planning, and the planning should be done in such a way, that the borrower makes the most of his borrowing capacity.

Home loans are good debt, and personal loans are considered risky for the buyer. Sometimes, even the home loan could turn into bad debts if, care is not taken while applying for them, and while you are repaying them. A borrower should pay attention to his or her own income while taking the loan and agreeing on the loan repayment option.

There are a couple of factors that you should look at, when you decide the loan amount

Take the loan that you can handle

Banks give 80% of the loan property, and the buyer has to pay the 20% from his own pocket. Be careful; do not get into a financial crisis by paying too much of what you are earning as a monthly EMI. It is better to take a loan that you can handle and pay monthly after, all your home expenses. A huge monthly EMI can put burden on your regular lifestyle and lead to an unpleasant life.

The eagerness and the enthusiasm to buy a property sometimes lead to heavy EMI burden, which can put huge pressure on your monthly expenditure. Living such a life is can also be harmful to your personal health. Therefore, when you are deciding the loan amount, you have to factor in your lifestyle too.

Do not go for the formalities

There are certain formalities for taking a bigger loan from the bank for buying a house; some borrowers take their homemaker spouses as a co-applicant of the loan to take a bigger loan from the bank. Be careful when you do this. In case of an unforeseen event, such as loosing job, your homemaker will be responsible for the paying the EMI, and if she in unemployed, your bank may take over the home from you.

Keep your monthly EMI as low as possible, if you are the only earning member in the family. Avoid the formalities. There is nothing formal when it comes to taking loan from the banks.

“Bad debts are sacrificing your future day needs, for your present-day desires”.

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