what are two different circumstances of providing loan explain in detail
Answers
1. . EMI SHOULD BE AFFORDABLE
A smart borrower will never bite off more than he can chew. The loan EMI should not push you into a corner. Your car EMI should not exceed 15% of your net monthly income while personal loan EMIs should not cross 10%. The monthly outgo towards all loans should not be more than 50% of your net income. The loan-to-income ratio should be within acceptable limits. If it is not, you will be forced to put other critical financial goals, like saving for retirement or your child’s education, on the backburner. Retirement savings become the first casualty in such circumstances.
2. KEEP TENURE SHORT AND SWEET
You must have heard about how keeping money invested for the long term reaps the power of compounding. Well, in loans it works just the other way. The longer the tenure, the bigger is the interest burden on the borrower. If you take a loan at 9.75% for 10 years, the interest outgo will be 57% of the principal amount. This figure jumps to 91% if the tenure is 15 years and shoots up to 128% for a 20-year loan. In 25 years, the interest outgo is 167% of the principal.
Borrowers are tempted to go for longterm loans because the EMI is lower and they enjoy tax breaks on the loan. But this is a misconceived strategy because they end up paying a huge interest on the loan. Though tax benefits bring down the effective cost of the loan, they are still incurring an expense. Unless the money can earn more than the effective cost of the borrowing, it should be used to prepay the outstanding sum.
Answer:
the circumstances of providing lone are as follows
Explanation:
1.loan is given to those person which are able to pay it. 2,the person have to pay rent by taking lone after the fixed time hope it will help you