All your loan-related questions answered by women who've been there, done that
Looking for a man in finance… to give me a loan
Unless you work in finance or have a trust fund, (the 6’5 and blue eyes are negotiable), chances are, you will at some point consider taking a loan — to fund your child’s education, to invest in buying your first home or to finally kick the corporate bucket to be your own boss in your startup.
Either way, unless you purchased L&T stocks or find a way to time travel back to the ’90s, you’ll likely need to borrow some money to kickstart your dreams. But alas, only if it were as easy as a Google Pay transaction. Taking a loan can be complicated, and the thought of being buried under paperwork is nothing short of a nightmare. To help ease your nerves and answer questions about the process, we spoke to finance experts and women who’ve been through the grind, so you don’t accidentally miss out on the fine print.
What you need to know before taking a loan
Do I have the financial capacity to repay a loan?
Before sign up for a loan, there are a few things you should consider, like do you feel secure in your job and do you have the income capacity to pay the EMIs? Kavita Bothra, Partner at Primassure LLP, a Navi Mumbai-based wealth management firm, recommends reviewing your earnings, outgoing costs, and outstanding debts as preparation. “Make sure you constantly pay your bills on time to maintain a decent credit score.” According to Kolkata-based CA, Jigisha Desai, a CIBIL score of 750 or higher increases your chances of loan approval (Curious about your score?).
Your age is another important parameter to consider when taking a loan, as the time you have to repay the money is limited. Dubai-based homemaker, Yasmeen Hussain, was 55-years-old when she co-signed a home loan with her husband and applied for an independent car loan the same year. “We didn’t have the tenure of 20 or 25 years for repayment that a younger person would have. So we pledged our investment for half the amount and took a loan for the remaining with a tenure of five years,” she says.
Which bank should I go to for a loan?
Before you get into bed with a bank, research the interest and foreclosure rates (the penalty fee when you repay a loan before the end of the tenure) they are offering, along with the grace period for payback. Many people prefer sticking to their parent banks for ease of transaction. Surat-based Rashi Agarwal, founder of Roohanirang Design Studio, applied for personal, business and machinery loans with her parent bank where her company’s GST and current account are registered to avoid excessive paperwork.
Hussain and her husband too stuck with their parent bank for both loans. “Our investments were at Axis Bank, which made it easier for us to manage our money. Plus, we have a relationship with the bank, they know our financials and spending habits. Our relationship manager was transparent with us about the process, which gave us the confidence to stick with them.”
When Tarangini Kaushik, 30, from Guwahati was applying for her master’s degree she took an education loan that was designed for girls’ higher education. “Government banks have their set of challenges like increased paperwork or filing up forms on a dysfunctional portal. The process of application is a little tedious for nationalised banks, but once that stage is crossed, it’s easier. Their interest rates are lower than that of private banks. I would also recommend looking out for loan schemes that are created for women or girls, whether it is education or business, as interest rates are often lower for women,” she says.
What documents will be required?
Get all your ducks in a row before approaching the bank. A few commonly requested documents include identity proof, address proof, proof of income, tax returns, employment proof, and collaterals like property, gold, shares, mutual funds etc. For her business loan, Agarwal says, “We shared a rent agreement, electricity bills, bank statements from the last six months, GST or other registration documents, business PAN card, and partnership agreement or MCA deed certificate.”
For a higher education loan, you may need to present marksheets of class 10th and 12th and your undergraduate degree, college prospectus and fee structure document, character certificate and affidavit from court, explains Kaushik.
What’s the fine print to look out for?
Those words typed out in the tiniest font at the end of documents is the fine print that becomes essential to comprehend the terms and conditions of your loan. Additionally, ensure you clarify any doubts you have about the process, leaving nothing to assumptions.
“You should check the amount of disbursement. In the case of an education loan, the banks may not tell you that you’d be required to pay, say, 30% of the tuition and they will provide only 70% (this ratio may vary for different banks). They may inform you at the last minute, forcing you to borrow a large sum from friends or family,” says Ahmedabad-based 25-year-old Manali Singh, who had applied for an education loan.
Hussain also suggests confirming the timing of the EMI. “I had told the loan officer we’d like the amount deducted in the first week of every month. We thought it’d be between the 2nd and 5th of every month, and we’d have enough buffer. But the officer took it literally and set it for the 1st of every month, causing pressure to fund the account before the EMI date. This was tough to tackle with unpredictable salary deposits. And once the paperwork was done, it became a challenge to chang it later. In hindsight, I shouldn’t have assumed and made the deduction date clearer.”
What more should I ask the bank?
There’s no such thing as a stupid question when it comes to money matters, especially when you owe boatloads of it to a bank. Mumbai-based corporate employee, Shweta Shetty Joeboy, 41, who took a home loan, says you should ask about the interest rates, how long you have to pay your loan, what is the principal amount that gets deducted from the EMI, and how soon you can start paying in large sums.
“You should check the interest rate for secured and unsecured loans, the flexibility of your payback period, and what if your parents aren’t working and cannot be the guarantors, are other queries worth getting clarity on,” says Singh.
How can I save money while paying EMIs?
Loan EMIs can eat into a significant chunk of your monthly income. How do you then manage your savings, investments and expenses? Bothra recommends sticking to a budget and prioritising the loan repayment. “Cut back on non-essential spending and build a fund for emergencies. Set aside a portion of your income for savings and regularly review your budget to ensure you’re saving. Consult a financial advisor if required.”
“Pay off loans in smaller amounts from your investments to reduce your repayment tenure or EMI. This saves money, which can be reinvested for better returns,” says Desai.
Extra sprinkles of advice from women who took loans
“For international student loans, both the bank and the university make it mandatory to get insurance (here’s your guide to getting different types of insurance) which is expensive, hence convince at least one to drop the insurance.”
— Manali Singh.
“I realised it was necessary to have a guardian or a male counterpart for the loan to be disbursed. The procedures felt much longer and the loan disbursement teams did multiple on-ground checks. I didn’t end up taking the loan, as the process to verify the loan through my parents and business partner (both males) did not go through. So you should be prepared for the extra scrutiny.”
— Rashi Agarwal.
“If you’re taking the loan on your own without your partner, you need to have hard conversations about money. It’s important to be practical about finances, since EMIs are no joke. You need to ensure you can afford it month after month. Take loan insurance so that you safeguard your partner’s interest. This was recommended to me by the bank employee handling my loan process.”
— Shweta Shetty.
“It’s not as easy as the banks make it out to be. They do numerous checks and you have to be prepared for intrusive questions. In case you’re taking a loan for a property, make sure your seller is honest with the bank, because if there’s any grey area, then your loan is refused. And make sure your own documents and finances are sorted.”
— Yasmin Hussain.
“Research well on the options open for you based on the educational institution as tier one colleges or universities have even lower interest rates and there’s a tax benefit as well on availing an education loan.”
— Tarangini Kaushik
