Taking out a loan for the first time can be both exciting and overwhelming. Whether it's for education, a vehicle, a home, or personal expenses, borrowing involves responsibilities. Learning how loans function, comparing different options thoroughly, and planning repayments can help first-time borrowers prevent costly errors and establish a positive credit history. By adopting a few straightforward habits, borrowers can make their borrowing experience smarter and less stressful.

Aditi Singh, Chief Strategy Officer, Satin Creditcare, said, "For those who are first-time borrowers, the biggest question to consider is why you are borrowing." Credit is more available than ever today, frequently with the click of a button or a phone call. Nonetheless, access to credit should never be the reason for borrowing. The purpose must be clear and justified, whether it is for education or healthcare, or for creating some form of livelihood. It is the need of productive consumption that must always keep credit an enabler, not a burden.

Singh says, "After formulating the purpose, the next smart habit is to determine your repayment capacity. As a borrower, a loan should fit with the nature of income stability and future cash flows, not on something considered impulse spending." Additionally, evaluating various credit options from banks, NBFCs, or microfinance institutions is crucial for borrowers to have an informed experience in finding the proper credit and cost for their needs.

According to experts, the third critical habit should be to read and understand the fine print, such as interest rate, processing charge and any penalties for the loan. Many first-time/less experienced borrowers often do not consider the long-term implications of what those line items can do. A consistent habit of repaying loans is also important. When borrowers pay their EMIs on time, it provides one less thing to worry about and subsequently builds the borrower's credit profile, making them more accessible to better terms in future lending opportunities.

"A critical and responsible first-time borrower's engagement is characterised by clarity of purpose, disciplined repayment, and financial literacy," says Singh. "For first-time borrowers, it provides an opportunity to connect with and develop a sense of identity and values that extend beyond your experience," he added.