Trying to get a loan is a tedious process, especially if it’s one of your first times. From getting your entire documents ready to filling out forms, you have to make sure you do it all correctly. However, even before you start applying for your loan an important part of the process is to decide on your loan amount. Your loan amount obviously depends on why you need the loan. Here are ways to decide on just how much money you should loan from a bank or financial institution:
- How much do you have?
Your loan could be for a new house or your car or for your business. Loaning the whole amount could be a bad idea considering that you will then have to pay interest on it. This also means a higher EMI amount every month. Calculate how much money you can arrange for from your existing investments or borrow from friends so you wouldn’t have to pay the interest on it. You could also sell off things like your car or some shares to reduce the loan amount.
- Work backwards.
Instead of figuring out how much loan you need, you can work backwards and calculate the EMI you can afford to pay. This you could get an estimate of the loan mount too. Most banks or financial institutions will approve of a loan amount based on your income; therefore, you may not be able to apply for a big loan. The loan EMI calculator allows you to get an estimate of your EMI by calculating the time period and the loan amount. You will also have to take into consideration the interest rates of different kinds of loans.
- How much do you need?
This will largely depend on what you are getting the loan for. However, you can work around the expense and see if you can reduce some cost, or divide it such that you can reduce your loan amount. You could pick a cheaper model of the car with less fancy features or work around how big you want your house to be.
The bank often decides the loan amount depending on how much security you can provide in return. You could get a loan against property or a gold loan too. In such cases the loan amount will largely depend on the value of your assets against which you are applying for loan. For those who have mutual fund investments, you could use these to get a loan too. That way you don’t have to sell your shares or give up on your mutual funds investments.
- CIBIL score
A good CIBIL score will help you ease out your loan process and approve your loan amount too. You can also negotiate the rate of interest with a good CIBIL score, that way you could apply for a bigger loan too. They will usually look at your past records and then accordingly generate your CIBIL Score. Applying for a loan from the same institution where you earlier got a loan from could be helpful too
Now that you know how to go about getting a loan, chase your dreams and make them real!