Taking a loan during the festive season is quite common, given that most people find it auspicious to buy a new house or purchase a new vehicle during this time. Additionally, people may borrow to purchase gold or festival-related stuff.

Live TV

Loading...

While the reason is any, it's important to be mindful while borrowing.

Here are 5 things to keep in mind (as compiled by Vivek Veda, Co-founder and CFO of KreditBee):

Spend within limits

Ignorance towards spending limits leads to ineffective utilization of funds and affects the quality of spending, which means allotting appropriate budgets to individual expenditure is the answer.

Setting upper and lower limits for expenditures ensures the practical direction of spending and allows to reap proper benefits from the loans.

Also read: 5 tips to make the most of deals online

Be clear with the end utility of the loan

The festive season brings in a plethora of expenditures. Unplanned debt can put financial planning into trouble. Hence, clarity of the utility of loans is of utmost importance. This includes earmarking the funds and prioritizing the spending.

Having an understanding of the end utility ensures the satisfaction of the primary needs the borrower had aimed.

Check the interest rates across comparable items

While opting for a loan, an individual should be well aware of various lending arrangements. The fundamental fact of this is the interest rate. The arrival of the festive season means various offers and discounts providing financing alternatives.

Having a keen eye towards interest rates, borrowers can choose the most suitable lending arrangement, basis the repayment capacity and financial planning.

Be comfortable with the tenure of repayment

Another important facet, while considering lending arrangement is the tenure of repayment. One should be sufficiently comfortable with the tenure. Again, opting for financing tenure which is less than the borrower’s finance schedule, leads to overstretching of the available funds and results in debt stress. At the same time, an individual should not opt for a longer tenure, resulting in excess fund loss in the form of interest accrual.

Also read: 4 thumb rules to do value purchasing

Repay on time

Being disciplined while repayment pays significantly. Missing an EMI or delaying payment adversely affects financial planning, in the form of debt stress and interest accretion, and most importantly credit score.

To ensure this discipline, one must prioritize dues and seek clarity on the expenditure.

Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.