Be it a home loan or a business loan, some factors should be taken into consideration while calculating the loan amount. While there are tools like EMI calculator, which make the job of calculating EMI simpler, it is still crucial to stay vigilant to ensure smooth repayment. Some mistakes that you should avoid while calculating loan amount and EMI are mentioned in this post.
Home loans and business loans are two of the most common types of loans availed in India. To meet the growing needs of all the different types of borrowers, NBFCs now offer many different types of home and business loans to meet the specific requirements of the borrowers. However, when it comes to taking a loan, there are many different factors that one should consider.
Calculating loan amount and EMI is one such important factor. If it is a home loan, for instance, NBFCs usually offer up to 80% of the cost of the property in the form of a loan. However, not every borrower is required to avail this maximum home loan amount.
While an online EMI calculator surely makes this job easier, it is still very important to thoroughly calculate how much loan you need to ensure that the repayment process is smooth and free from any penalties. Some of the mistakes that you should avoid while calculating home loan amount and EMI are mentioned below-
- Borrowing More Than You Can Repay
It is rightly said that one should not live beyond their means. When it comes to calculating the loan amount, it is very important only to borrow an amount which you can easily repay without stressing your other personal and professional expenses. It is usually recommended that the EMI of a home loan should not be more than 30%-40% of one’s monthly income.
- Going for a Long Repayment Tenure
For a home loan, NBFCs usually offer a maximum tenure of 30 years. While choosing a longer tenure is very tempting as it reduces the monthly EMI, one should go for the shortest possible tenure that they can afford. As the outgo of interest increases with the increase in tenure, there can be a substantial difference between the total amount one pays for a 10-year loan and 20-year loan.
- Not Considering Lifestyle Expenses
While calculating how much EMI one can pay on a monthly basis, it is very important to consider lifestyle expenses too. Borrowers who like to splurge on vacations, entertainment, and outside food on a regular basis can be in serious trouble if they fail to consider this important aspect while calculating their loan amount and EMI.
- Borrowing Hastily
A home loan or a business loan is a long term commitment and the EMI usually, makes up for a significant expenditure in your monthly budget. Thus, borrowers should surely take some time out to think about all the different aspects, like current income, the possibility of decrement or increment in future, current lifestyle, current expenses of the family, future expenditures, other investments, etc. before taking a loan.
While many different types of loans are now widely offered by NBFCs to make it easier for us to achieve our dreams, proper calculation of how much loan you need and EMI you can pay is very important. It is by staying vigilant throughout the borrowing and repaying process; one can ensure financial stability and achieve the goals of their personal and professional life.