About Loans: Everything You Need to Know
In today’s blog post, we’ll talk about loans. Loans, meaning borrowed money, are essential at times in our lives. Whether it’s buying a house, a car, starting a business, or needing money in an emergency—loans seem like an easy way out. But do you know how risky taking a loan can be? Let’s understand every aspect of loans in this post in simple Hindi.
What is a loan?
A loan is a system in which a bank, NBFC (non-banking financial company), or a financier lends you a fixed amount of money. In return, you have to repay that amount in the form of EMIs (Equated Monthly Installments) plus interest.
Example: If you take out a personal loan of ₹5 lakh at 12% interest for 5 years, you’ll have to pay an EMI of approximately ₹11,000 per month. In total, you’ll pay ₹6.6 lakh – that’s ₹1.6 lakh extra just in interest!
Main Types of Loans
There are many types of loans available in India. Here are some popular ones:
- Home Loan**
- For buying or building a house.
- Interest rate: 8-10% per annum.
- Tenure: Up to 20-30 years.
- Tip: Prepayment charges are low.
- Personal Loan**
- For any personal expenses (wedding, travel, medical).
- Interest: 10-24% (most expensive).
- Tenure: 1-5 years.
- ⚠️ Caution: Poor credit score can be costly.
- Car Loan**
- For a new/used car.
- Interest: 8-12%.
- Tenure: 5-7 years.
- Education Loan
- For studies (India or abroad).
- Interest: 8-14%.
- Special feature: No EMI payments until studies are completed.
- Gold Loan
- Instant money against gold.
- Interest: 7-15%.
- Tenure: 6 months to 3 years.
- Advantages: Fast processing, fewer documents.
What to consider before taking a loan?
Taking a loan is easy, but repaying it can be difficult. Ask yourself these questions:
- Do I really need it?
Can savings suffice?
- Can I afford the EMI?
The EMI should not exceed 30-40% of your salary. - Check your credit score
If your CIBIL score is 750+, you’ll receive lower interest. - Is the interest rate fixed or floating?
Fixed: EMIs remain constant. Floating: Varies with RBI rates. - Hidden charges
Processing fees, prepayment penalties, late fees – read them all!
Benefits of taking a loan
- Big dreams come true (house, car).
- Tax benefits (Section 80C, 24B on home loans).
- Improves credit score (if repaid on time).
- Help in emergencies.
Disadvantages of a loan
- Interest burden: Staying in debt for years.
- Fear of default: Missed EMI → Bad CIBIL → Difficulty getting a loan in the future.
- Property seizure: Home/car can be seized in a secured loan.
- Mental Stress: The burden of debt takes away sleep.
Smart Loan Tips
- Compare: Check interest rates on sites like Paisabazaar and Bankbazaar.
- Choose a shorter tenure: The sooner you repay, the lower the interest.
- Prepay: When you have extra money, pay more than the EMI.
- Get Insurance: Protect your family with a loan protection plan.
- Apply Online: Paperless, fast approval.
Real Story
My friend Rahul took a personal loan of ₹3 lakh in 2018 at 18% interest for his wedding. The EMI was ₹9,000. He lost his job after six months. The missed EMI → CIBIL score dropped to 550. The loan is still running, and the interest is increasing. Lesson: Keep an emergency fund; loans should be your last resort.
Conclusion
A loan is a tool, not a weapon. If used correctly, it makes life easier; if used incorrectly, it can be devastating.
Remember: “It’s easy to get a loan, but difficult to repay.”
Next time, think thrice before taking a loan. And yes, “Savings first, loan later!”