1. Credit card
a) It’s likely your first experience in handling debt, and also most expensive at 24-30% annual interest, hence necessitating timely payment of bills regularly without rolling over credit.
b) Begin with a low credit limit card since bill payment record will be your credit score’s foundation.
c) Set yourself an affordable monthly spending limit, and stop card usage if unable to pay its bill for two months.
2. Education loan
a) Before taking one, evaluate whether your future salary will be able to compensate for it.
b) Public-sector banks offer cheapest interest rates, but NBFCs give fattest loans.
c) 11-14% is the interest rate charged on education loans.
d) Try to service at least the loan's interest component during the grace period.
3. Car loan
a) While a car’s value keeps falling being a depreciating asset, its fuel and maintenance costs keep rising, so factor in these too with an affordable EMI.
b) Some car companies also offer own finance schemes, which promise lower interest rates.
c) To avoid high interest outgo, pay at least 50% of car’s price from own savings while haggling with dealer to swap freebies for higher cash discount.
4. Home loan
a) Being biggest investment you'll ever make, ensure that you can afford to pay its EMIs regularly.
b) As a thumb rule, your entire total debt should not be more than 50% of your take-home pay.
c) As total interest outgo is greater for longer tenures, opt for a shorter term, even if you have to economize on other expenses to pay a higher EMI.
d) If you’ve an excellent credit score, negotiate with lender for a lower interest rate.
e) Take a home loan insurance policy, so that EMIs will get paid even upon an untimely demise.
5. Personal loan
a) This includes travel loan, consumer durable loan and various EMI schemes for catering to your temptations, not needs, so don't opt for one haphazardly. b) Also, beware of high processing fees of EMI schemes that claim zero interest.
a) It’s likely your first experience in handling debt, and also most expensive at 24-30% annual interest, hence necessitating timely payment of bills regularly without rolling over credit.
b) Begin with a low credit limit card since bill payment record will be your credit score’s foundation.
c) Set yourself an affordable monthly spending limit, and stop card usage if unable to pay its bill for two months.
2. Education loan
a) Before taking one, evaluate whether your future salary will be able to compensate for it.
b) Public-sector banks offer cheapest interest rates, but NBFCs give fattest loans.
c) 11-14% is the interest rate charged on education loans.
d) Try to service at least the loan's interest component during the grace period.
3. Car loan
a) While a car’s value keeps falling being a depreciating asset, its fuel and maintenance costs keep rising, so factor in these too with an affordable EMI.
b) Some car companies also offer own finance schemes, which promise lower interest rates.
c) To avoid high interest outgo, pay at least 50% of car’s price from own savings while haggling with dealer to swap freebies for higher cash discount.
4. Home loan
a) Being biggest investment you'll ever make, ensure that you can afford to pay its EMIs regularly.
b) As a thumb rule, your entire total debt should not be more than 50% of your take-home pay.
c) As total interest outgo is greater for longer tenures, opt for a shorter term, even if you have to economize on other expenses to pay a higher EMI.
d) If you’ve an excellent credit score, negotiate with lender for a lower interest rate.
e) Take a home loan insurance policy, so that EMIs will get paid even upon an untimely demise.
5. Personal loan
a) This includes travel loan, consumer durable loan and various EMI schemes for catering to your temptations, not needs, so don't opt for one haphazardly. b) Also, beware of high processing fees of EMI schemes that claim zero interest.