How to plan for your child’s future if a personal loan rejected

Every parent wants to fulfil their child’s dreams and wishes to see them become successful in all endeavours of life. While you financially plan to fulfil all your child’s dreams, make sure your child is financially protected even when you aren’t around due to any mishap.  

And given that taking a personal loan is often a helping hand many parents have in mind to tackle a shortage of funds in life, what if your RBL bank personal loan application gets rejected? You cant rely on a single loan or lender for planning, right?

Let us discuss how parents can plan for their child’s future and ensure that their absence doesn’t hinder the child’s future goals and dreams.

How to choose the right or correct investment for your child’s future

Firstly, don’t worry about the tons of decisions to make. Sit and take it to step by step. Analyze your current financial position and years left for your child’s higher education as well as marriage. Since child plans need a financial commitment from the parent’s side through regular investments, proper financial planning is required before choosing the child plan. 

Secondly, you need to approximate the amount that would be required for your child’s future goals, i.e. the corpus required, and accordingly, you get the idea of how much RBL bank personal loan you may require. While calculating the corpus amount, make sure you take into account the inflation costs as well. Approximate the corpus amount for your child’s higher education based on current career possibilities and costs associated with them. 

The immediate next step would be to choose the appropriate investment avenue which would help in accumulating the adequate corpus and also suit the parent’s financial position and risk appetite. When you start investing early, you give more time to your money to grow and therefore provide higher returns. Choice of investment avenues is what ultimately shapes your portfolio. Risk-averse parents would prefer opting for safer investment options such as traditional child insurance plans, fixed deposits etc., which provide guaranteed returns with minimum risk. 

Whereas parents willing to take risks in order to fetch higher returns may prefer investing in options such as SIPs through equity mutual funds. Hence, parents need to figure out their financial capability and accordingly plan to secure the child’s future. Be sure whether you would need the help of IDFC first bank personal loan or not to fund the amount.

And remember, if you start investing early, you would generally need to pay a lower premium or invest a lower amount of SIP in order to accumulate the desired corpus when the child requires it.

Additionally, to ensure that your child’s future remains secure even in your absence or if your RBL bank personal loan application is not accepted during the time of need, parents should opt for term insurance as well, as it provides an assured amount for our family when you aren’t around. By opting for an adequate amount, you ensure that your child’s financial needs are met in your absence also, and investments done for his/her future can also continue with the assured amount provided by the term insurance policy. 

Where to invest?

Mutual funds- One of the best ways to strengthen your finances and be ready for a child’s financial help even if you are unable to take an RBL bank personal loan and even your IDFC first bank personal loan does not get accepted by investing in mutual funds.

Mutual funds have nearly become the most preferred investment option for most parents since these offer various categories and asset classes to invest in, along with investment options for various investment horizons that cater to the needs & requirements of every kind of investor. Investing in equity mutual funds is ideally the best option for long term goals such as your child’s higher education and marriage since equities have consistently proven to provide higher returns in the long run and have beaten the inflation costs comfortably. 

However, while planning to build a corpus for your child’s higher education and marriage without taking the help of IDFC first bank personal loan, parents need to first know the 2 ways to invest in mutual funds-Direct plans and Regular plans. 

  • Regular plans- Regular mutual fund plans are sold to investors through distributors and financial advisors and therefore involve commission. This raises the expense ratio of regular plans as compared to direct plans. Regular plans are available both offline and online through financial advisors and online financial marketplaces, respectively. Due to uncertainty regarding how and where to invest, many parents who lack knowledge or experience in mutual fund investing generally opt for regular plans despite lower returns being offered by them as compared to direct plans. Since regular plans are managed by experienced and skilled fund managers working for fund houses and Asset management companies (AMCs), parents generally consider investing in mutual funds through this channel, even if it implies paying a higher expense ratio and receiving lower returns than direct plans.
  • Zero commission direct plans- Another way of investing in mutual funds for parents is to go for zero commission direct mutual fund plans. These outscore regular plans since these have a lower expense ratio, higher NAV and also provide higher returns than regular plans. These can be availed through online financial marketplaces, which guide the investors and provide advisory services as well while investing in direct plans.

ULIPs and Child insurance plans – Amidst the stress of whether you will get an RBL bank personal loan or IDFC first bank personal loan to fund financial needs, don’t ignore the importance of another product ULIPs.

ULIPs provide policyholders with an integrated plan of insurance and investment. They involve a part of the premium paid by the policyholder being directed towards investment into debt, equity etc., depending upon the policyholder’s risk profile, and the rest goes towards providing cover. Here, the risk has to be borne by the policyholder, and the amount to be invested in is based on the policyholder’s financial position and convenience. 

Traditional child insurance plans involve an investment of funds as per the company’s discretion and policy. Premiums paid are invested in a common fund, and thus the policyholder cannot track his/her individual portfolio. 

ULIPs, on various grounds, outscore the traditional child plans majorly due to higher chances of growth, transparency in operation, an option of switching between funds, etc. Traditional child plans are a safe haven for those not willing to risk anything and prefer guaranteed returns.    

Fixed deposits, Debt funds-  In case your child would be reaching his/her higher education stage within the next 1-2 years, and you already have a home loan or other loans so you may not go for IDFC first bank personal loan or fear that it can get rejected, its better to invest in short or moderate-term investments such as Fixed deposits and debt funds would be the appropriate option. Fixed deposits involve minimal risk and are currently offering interest rates up to 9%p.a. whereas debt mutual funds involve moderate risk and have been giving around 7% returns in recent times for the short term (1-2 years). 

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