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How To Prevent The Home Loan From Turning Into A Bad Debt

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Most people unknowingly fall into the trap of a bad debt that they fail to repay. They try crawling out of it but get even more entangled within the trap. A common reason behind this unrecoverable pile-up of debt is an ill-planned home loan!


Availing a home loan without prior research and consideration can turn the amount into a bad debt. As the home loan amount apparently exceeds any other loan amount, it is likely to turn into a bad debt if not planned wisely. The only thing that can prevent a home loan from turning into a bad debt is to perform a strategized research and follow certain precautionary steps before applying for it. Here are some points you can consider to ensure a home loan does not turn into a bad debt.


The Precautionary Tips To Prevent Home Loan From Turning Into A Bad Debt
While applying for a home loan, most of the people just look at the principal amount they require, the interest they’ll have to pay and in how much time. But there are some very important things that one should keep in mind while applying for a home loan. The precautionary tips given below would prevent your home loan from turning into a bad debt.


  • Decide The EMI Wisely: The EMI or equated monthly installments is the first thing that should be considered while thinking about getting a home loan. Calculate the monthly income collectively from all the members of the family and decide on how much you can take out for loan repayment. According to the finance experts, maximum 40% of the in-hand salary can be spent towards EMI and not any penny more to avoid debts in future. Spending more than 40% towards EMI can lead to constraints in expenditure which could lead to more loans for personal expenses.
  • Don’t Grab The Highest Loan Amount: Many people try to get the maximum loan amount for their home as much as their credit score permits. Try to arrange as much finance as possible to decrease the principal amount of your loan. The bigger the loan amount, the heavier the EMI would get. This might put you in a financial crunch. Consider the price of the home and try to minimize the total loan amount. Avoid grabbing the highest amount and go for a sum that you need and cannot do without to avoid huge EMIs for a long time period.
  • Pay Attention To All The Formalities and Documentation: There are various formalities that you have to take care while applying for a home loan. It is advisable that you pay keen attention to these formalities to prevent it from turning into a bad debt. In many cases, people add their homemaker wife’s name as a co-applicant for a home loan in order to secure a bigger amount. This is considered by many as just a casual formality and done without keeping its future implication in mind. In future, if the sole earner of the house loses his/her job, the co-applicant becomes liable to pay the EMI. Failing to do so may lead to bank reposing the house. So, it is important that you pay attention to all the formalities listed in the application form to avoid getting trapped in a debt trap.

In the end, just think of the future before taking any home loan. Assess the increment in income with the increase in expenditures you’ll experience in the coming years to calculate the EMI you could spare and accordingly the loan amount. Think smart and act wise while taking a home loan to prevent it from becoming a bad debt in the future.

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2 Comments

  • Admin

    Nidhi Arora

    17 August, 2018 at 5:27 pm

    Yes, it is true that many people have faced this kind of situation where loans have become a burden for them. However, if we follow the certain rules during the situation, many problems can be avoided. And, Your thoughts are just perfect in this regard. Much obliged.

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  • Admin

    Vishal Shekhar

    17 August, 2018 at 5:29 pm

    Your blog covers a wide range of topics and that is the reason I always visit your blog to find the unique solutions for different kind of problems. Your way of explaining things are just fantastic. Thanks for your continuous effort.

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