The absence of adequate financing has plagued the Indian manufacturing industry for decades. As more and more engineers venture into the manufacturing business and an increasing number of existing businesses are preparing themselves for the competition, financial institutions have started to offer tailor-made monetary schemes that help an industry extends its reach.
An engineer loan is one such product made for salaried and self-employed engineers who are looking for financial backing to overcome the top challenges faced by engineering firms.
There are certain factors a borrower has to remember before he or she decides to take a loan for engineers. A loan for engineers comes with certain terms and conditions for the application and repayment process. A borrower will be able to properly utilise the credit if they know how to avail and repay the loan. So, let’s go through the process in details.
Before taking the loan –
- Make sure you meet the eligibility criteria – The very first step of taking an advance will be to check your eligibility criteria. You can use an online eligibility calculator to see approximately how much money you can avail as a loan for engineers. Then measure your creditworthiness by checking your monthly income against your fixed liability.
An engineer loan also has a few specific eligibility criteria that you have to meet to avail an advance. For example, you have to be between 25 to 65 years of age and need to have at least three years of work experience (if you are a salaried individual) or 3 years of business vintage (if you are self-employed) to take the loan.
- Check your CIBIL score – CIBIL score is another important criteria that you should be aware of. It is a three-digit score that reflects your financial habits and history. Lenders prefer an applicant with a score of 750 or better as they have a history of repaying the loan in time. You might also get the chance to negotiate the engineer loan interest rate if you have a decent CIBIL score.
If you have a poor credit rating, you can follow some simple steps to increase your CIBIL score before applying.
- Decide the amount of fund you need – Carefully consider your requirements and prioritise your needs to decide the amount of credit you need.
- Calculate the EMI – Remember to determine your EMI with an online EMI calculator to know what will be your monthly obligation during the loan tenor. You should opt for a lower principal amount for your professional loan if the EMI amount is too high. A lender will also reject your application if your FOIR exceeds 50%.
- Choose the ideal tenor – Also, you can calculate the ideal tenor to repay your loan with the EMI calculator. Financial institutions offers flexible repayment tenor or 12 to 72 months and you should choose the correct period according to your repayment capabilities.
Once you have gone through all the details mentioned above, search the market for a lender who is meeting all your requirements, and apply for an advance.
After taking the loan –
- Make a budget – Experts recommend making a budget while repaying the engineer loan as it helps to maintain your expenditure and savings. Maintaining a budget will ensure that you have money to pay your EMIs with.
- Pre-pay if you have some extra fund – Most financial institutions offer the option of pre-payment in exchange of a small fee. You can either choose to repay the entire amount at once, or repay a part of the advance and pay the rest in EMIs. Part pre-payment decreases either the loan tenor or the EMI amount, and both pre-payment systems improve your CIBIL score.
- Do not miss any EMIs – Probably the most important factor you should consider is that you should never miss out on an EMI payment. Defaulting on EMIs will incur extra charges on the principal amount as well as bring your credit rating down.
These are some of the strategies you can use to manage your loan without stressing your finances. If utilised properly, you can meet any of your financial demands with the help of a loan for engineers.