Modules for Beginners
All about loans
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The why and the how of taking a loan
The long-term nature of a loan and the amount of financial burden that it adds begs the question, ‘should you take a loan in the first place?’. Unfortunately, there’s no right answer to this question. It all depends on the individual and the kind of needs and requirements that they have.
It is true that not all situations demand a person to initiate a loan process. Some can be handled without having to resort to a loan or a credit facility. But others, especially those situations involving big ticket expenses may require external financial assistance. And that’s precisely what we’re going to take a look at in this chapter of Smart Money.
Understanding the scenarios that require taking out a loan
Unless you have a significant amount of savings to get you comfortably through a particular situation, you may almost always have to resort to seeking out external financial assistance. There are quite a bit of scenarios that can push you towards initiating a loan process. Let’s take a look at a few of them.
You wish to own a house of your own
Owning a house has always been one of the many dreams of an average Indian individual. However, taking the rising real estate prices into account, many of these dreams are at risk of remaining a dream till the very end. With good-quality apartments costing upwards of Rs. 30 lakhs in major cities, funding the purchase may not be possible with just an individual’s savings.
Here’s where taking out a home loan can help. It provides enough immediate liquidity for an individual to purchase their dream home and gives them the necessary flexibility to repay the loan in small, manageable installments over a sufficiently long-term.
You wish to purchase your own vehicle
Although not as expensive as a home, a vehicle, be it a two-wheeler or a four-wheeler, also requires a major investment. While many average Indian households may be able to afford a two-wheeler using their own savings, a four-wheeler would mean stretching their budget thin. A vehicle loan can bridge this gap by enabling them to purchase a vehicle right away without having to wait for years on end.
You wish to start a business
Establishing a business from scratch requires a lot of time and effort. In addition to that, it also requires plenty of funds too. A business loan can help you kick off your entrepreneurial journey by providing you with the required funds to set up and run a business efficiently. The funds from a business loan can be used to purchase expensive equipment that you might need to start delivering products or services.
You wish to pursue higher education
The cost of higher education in prestigious universities or colleges can drain you financially. Especially if you’re looking to pursue such courses abroad. On top of having to pay for your education, you will also have to account for food, accommodation, and other miscellaneous expenses as well.
An education loan can help you cover all of this and more. What’s more is that with an education loan, you don’t have to start repaying it immediately. You can choose to do it after 12 months from the date of completion of your education or after 6 months from the time you start work.
How to take a loan?
If you’re in need of a loan to satisfy your financial needs and obligations, but are unsure of how to start the loan process. Here’s something that can help you out. All that you have to do is follow the below loan process steps to get started.
That said, here’s something that you should know. The loan process outlined below is to just give you a fair idea of what you should do to apply for a loan. This process may vary from one lender to the other.
Now that we’ve gotten it out of the way, let’s begin.
- Firstly, visit the official website of the financial institution with whom you would like to avail a loan.
- Navigate to the loans section of the website and click on the kind of loan that you wish to apply for.
- Fill the online application form and submit the same along with all the supporting documents. The supporting documents may also vary depending on the type of loan that you opt for.
- The loan application will be taken up for verification and review by the lending institution.
- You will receive a loan application acknowledgement number or reference number. Make a note of it. You can use this number to track the status of your loan application.
- Once the application verification is successful, the loan amount will be disbursed to the bank account listed in the loan application form.
With this, we’ve come to the end of the penultimate chapter of this module. In the final chapter, we’ll take a look at the various tax benefits that loans can offer you. Until then, keep reading Smart Money.
A quick recap
- The choice of taking a loan depends on the individual and the kind of needs and requirements that they have.
- While not all situations demand a loan, big ticket expenses may require external financial assistance.
- Some of the scenarios that might require you to take a loan are - for the purchase of a home or a vehicle, for kick starting a business enterprise, and for pursuing higher education.
The loan process tends to vary from one lender to another. So, it is crucial to ensure that you’re following the right loan process steps.
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