In India, personal loans are in high demand. Since they don’t require collateral, they can be obtained online, and they have flexible repayment terms.
It does not matter if you need a personal loan to finance a high-end purchase or a sudden emergency situation. You can, however, get out of debt by borrowing prudently.
Despite the ease with which this finance option can be accessed, you should Follow These Guidelines When Getting A Personal Loan.
Borrow only what you need
- 1 Borrow only what you need
- 2 Tenure should be as brief as possible
- 3 A large loan amount should always be insured
- 4 Ensure timely repayments
- 5 Become familiar with the Terms & Conditions
- 6 Look for the best option at all times
- 7 Prepay when and if Possible
- 8 Calculate EMI before going for a Personal Loan
- 9 Never take a personal loan for investments
- 10 Don’t avail other Personal Loan before Closing the First One
It is true that technology has changed the way lending and borrowing work, which has made borrowing better for the borrower. Yet, borrowing without a compelling need or borrowing more than was necessary does not make sense. Getting a desirable loan is a pleasant experience, but repaying the loan is never an enjoyable experience. The amount borrowed directly affects EMIs. ‘Never take out a loan that you cannot afford to repay’. EMIs for a personal loan should be 10% of the monthly salary as in addition to paying the EMIs, there should be enough money left over to pay for other monthly expenses.
Tenure should be as brief as possible
In addition to reducing the EMI, longer tenures are always enticing. In this instance, however, the borrower may unknowingly end up paying the lender far more than the amount borrowed. Shorter repayment terms will result in higher EMIs, but you will pay less interest to your lender since you are repaid in a shorter amount of time.
A large loan amount should always be insured
When the amount of the loan is significant, having a Loan Protection Insurance is essential. By insuring the borrower’s future, the loan is repaid in case of default. Most loan insurance policies also cover job loss, serious accidents, disability, and death. The insurance company is therefore responsible for paying any remaining payments.
Ensure timely repayments
It is indiscipline to pay late fees and lose your credit rating when you delay your payments. Due to the fact that late EMIs directly affect one’s CIBIL Score, one’s credit and financial history is represented by CIBIL. As a result, it is difficult for future borrowers to borrow. So being on time with your EMIs is always a good idea.
Become familiar with the Terms & Conditions
The borrower must sign the loan agreement when applying for any type of loan. A lot of people sign it in a hurry without reading what the agreement says. The terms and conditions of the loan are included in the agreement, which every borrower should be aware of. It may be complicated and even surprising in the future when you find some unexpected charges. If you do not read and understand these agreements, you may run into problems.
Look for the best option at all times
For personal loans, there are many options. It varies from lender to lender, though, how much they charge. When seeking a personal loan, a person should compare options, which can be easily accomplished using the internet. Compare rates and charges at different banks. Afterward, select a lender that meets eligibility requirements and will provide the loan amount and tenure you need.
Prepay when and if Possible
Always try to save money wherever it can be done. Saved money can help to prepay the loan. There are many things such as bonus, incentives, hike which provides extra money which can be saved and used to prepay the personal loan. Prepaying a personal loan will help to save a significant amount on the interest which would have been paid throughout the tenure to the lender. Moreover the life will be debt free and the money which was going into loan repayment can be used for other purposes.
Calculate EMI before going for a Personal Loan
Nowadays online EMI calculators are available on many websites where it is easy to calculate EMIs with a few clicks. Calculating EMI in advance can give a picture about the future when the loan repayment will start and how would it affect the monthly budget. Using the Personal Loan EMI Calculator different versions of loan amount and tenure can be worked out.
Never take a personal loan for investments
Personal loans are unsecured loan which comes with high interest rate. If personal loans are used for investment purpose such as in stocks, shares or even for any business there is no surety that it will bring profit. This will make difficult for the borrower even to pay the EMIs. So, if possible try to avoid investment with a personal loan. Moreover, the basic idea of investment is to make money on the invested amount, hence an amount secured through a loan will also include the interests on it. Then the investment channel should give returns which are much more than the interest on the personal loan for someone to actually be making money.
Don’t avail other Personal Loan before Closing the First One
Going for personal loan one after another even without ending the previous one shows that the borrower is credit hungry and doesn’t have a financial stability. Hence the lender might even reject the application which in turn will bring down the CIBIL Score which can make future borrowing difficult. However, if the previous personal loan is at a higher interest rate, then it makes a complete sense to go for a new one to close off the previous higher interest loan(s). If there are multiple running loans, then a debt consolidation will not only help reduce the EMI burden but will also improve the CIBIL Score over time.