The ideal world calls for enough money for everybody to meet all the needs. However in reality there is a yawning gap between the financial aspirations and financial reality and many are thus left with no option but to avail a small payday loan to meet the financial needs and personal goals. The technology has really altered the way the poor credit loans were earlier being disbursed; but the canons for prudent borrowing still remain the same. Let’s understand some of the golden rules you ought not to miss when borrowing money to meet the financial needs:

    • Never Borrow More than Your Repaying Capacity

    The first and the foremost rule still remains the same as what we have been taught by our elder generations. Always take an emergency loan online of an amount you can easily pay back. As a rule of thumb, the EMIs should never be more than 10% of the net monthly income of an individual. The combined outgo towards the loan amount should never be more than 50% of the monthly income of the individual.

    • Limit the Spendings

    Most of the loan borrowers are often seen taking short term loans for the purpose of making some expenditure. Ignorance towards the limit of spending often leads to an ineffective utilization of available funds which in turn affects the quality of spending. There is thus a need to allot appropriate budgets for individual expenditure and an upper and lower limit should be set for expenditures to ensure proper benefits are reaped in from the loan availed.

    • Check the Interest Rate Factor

    The loans which are unsecured usually come with a high interest cost as high as 20%. Thus, whenever you plan availing a loan, always look for the lowest possible interest rate. Even a small change in the interest rate is capable of making a huge difference to the loan costs. If you are availing a payday loan online, make sure to compare the interest rate being offered by various websites and then select the best. The interest rate is usually decided in relation to certain factors, including the reliability and stability of source of income, credit score, tenure of the loan, to name a few.

    • Never Borrow for Splurging

    Money should never be borrowed from outside sources for the purpose of splurging or giving away for any discretionary expenses. Taking a loan for the purpose of incurring any sort of entertainment expenses or purchasing gadgets often can pull an individual into a deadly debt trap. There are few individuals who avail a loan for the purpose of making an investment. As a word of caution, never indulge in this practice as no investment is capable enough to ever cover the cost attached to the loan availed.

    • Clarity on the end Utility of the Loan

    An individual usually has a plethora of expenses to make. An unplanned debt can put the entire financial planning into great trouble. Hence, a clarity on the utility of the loan is of great importance. This includes earmarking the loan amount and prioritizing the spendings. Having a clarity about understanding of the end utility of the funds ensures satisfaction to the borrower.

    • Keep Loan Tenure as Short as Possible

    The maximum loan tenure for a loan is 30 years and this is for availing a home loan. The longer the tenure of the loan, the lower is the loan EMI. However, it is always advisable to take the loan for the shortest duration possible if one can afford repaying the same. In the long term loan, the interest amount usually comes to be quite high. Also, taking a loan is always considered to be negative compounding. The longer the tenure of the loan, the higher is the interest amount being charged.


    As the editor of the blog, She curate insightful content that sparks curiosity and fosters learning. With a passion for storytelling and a keen eye for detail, she strive to bring diverse perspectives and engaging narratives to readers, ensuring every piece informs, inspires, and enriches.