Do's and Don'ts of a Personal Loan
A personal loan is one of the most accessible options available today to tackle cash crunches. Banks and NBFCs offer personal loans these days at minimum eligibility criteria so that the vast majority of the populace might have access to funds. The personal loan funds can be used for various purposes such as buying electronic gadgets for your home, planning a vacation, spending towards educational purposes and sundry other things.
Unlike other loans, which take quite a lot of processing time, personal loans take minimal processing time. In most cases, personal loans are approved instantly, and the applicant will receive the funds within a few hours after approval.
However, when you apply for a personal loan online, you must be aware of various factors ignoring which will impact your finances and leave a black mark on your credit history. For example, in the urgency of getting funds, people may forget to take note of the interest rates. During such instances, it may affect the monthly budget of the borrower profoundly and can also cause future financial worries. Here are a few pointers on the Do’s and Don’t of personal loans to avoid such incidents.
Do’s of the Personal Loan
Compare the Interest rate
Different lenders provide personal loans at Different interest rates. Being a customer, you must do a comparative study about the interest rates offered by different banks before deciding to choose the bank with the most competitive rate.
Borrow what you need
Knowing how much money you would need at least a ballpark estimate before applying for a personal loan is essential. Borrow only what your requirement needs, even if you qualify for a higher sanction. Doing this would help you reduce the interest rate on a higher amount that you didn’t require first place. Make sure your loan commitments do not exceed more than 50% of your monthly income.
Take into account additional features and benefits
Before you apply for a personal loan, do your own research by comparing loan offerings from multiple lenders. Begin by comparing loan amount, tenure, and interest rates. Finalize the one based on additional features and offers. It can help you reduce the cost of borrowing or even help you get the funds on the most flexible terms
Use a Personal Loan calculator
Settle for a loan amount after using a Personal loan calculator. Provide information it asks for, like loan amount, rate of interest, and tenure. It will provide you with a detailed break up of the monthly instalments, which will help decide your repayment ability.
Don’ts of a Personal Loan
Don’t go for the first loan offer you receive
Your inbox might be flooded with different loan offers from multiple lenders. It does not necessarily mean you have to go with the first offer you see or receive. It is essential to check for different offers from multiple lenders and pick the one that suits your requirement.
Don’t go for the total amount offered by the lender
Your lender might persuade you to go for the maximum amount your profile is eligible for. However, we do not recommend going for the full amount just because you qualify for it. Personal loans have higher interest rates than other loans, so you need to exercise caution before expressing your consent. Accept the loan as per your repayment capability. The payment you seem to accept first might prove to be a goliath staring at you when you, unfortunately, lose a job or lose your source of income.
Do not apply for multiple loans at once
Sometimes when people are in urgent need of funds, they apply for multiple loans simultaneously. Each loan application entails a credit check. Making numerous enquiries at the same time would result in a hit to your credit score, thereby affecting your future loan prospects.
A personal loan is a perfect financial tool that often comes to your rescue during emergencies. However, these are some pointers that you should keep in mind before applying for a personal loan.