Rules to Follow While Taking a Personal Loan

Whether buying a car or renovating the home, paying off a credit card bill or meeting medical expenses, a Personal Loan is a great rescue for catering to all such expenses. This Instant Personal Loan comes handy when people face an acute cash crunch and brawl to get access to a big amount.

Many NBFCs provide Personal Loan with an affordable interest rate. It also brings tailor-made pre-approved offers for Personal Loans, home loans, loan against properties and a pool of other financial products.

However, several factors seem to appear while considering Personal Loans. To cut a long story short, here is a comprehensive guideline to follow when a person is planning to take up this financing option.

1) Check eligibility criteria before applying

Most lenders provide free online eligibility calculators to assist their customers with qualifying criteria. With this easy option, an applicant can learn all the norms regarding the Personal Loan eligibility criteria.

2) Cut the cloth according to the need

This is the thumb rule before considering a Personal Loan. A borrower should apply for an amount which he can comfortably repay. So, it is best advised to opt for a loan amount that doesn’t become a burden in the future.

For instance, if a borrower is in need of improving his home, he should go for an amount which will exactly meet the necessary expenses, leaving any surplus.

3) Learn all details regarding interest rate

Talking about the Personal Loan interest rate, most of the lending institutions provide the amount with a fixed rate of interest. However, one must keep an eye over the fluctuating interest rate as per the RBI guidelines.

4) Target a short tenure

Longer the tenure, lower is the EMI. On the flip side, shorter tenure has its advantage too.

In a long-term loan, interest outgo elevates. However, if a person targets a short tenure to repay his loan, interest outgo falls low on the principal.

5) Calculate EMI beforehand

An intelligent borrower will always calculate the EMI before-hand. Lending institutions give customers access to Personal Loan EMI calculator for fetching accurate calculation.

6) Timely repayment

A borrower has to be a routine payer in case of Personal Loan. Delaying in payment can be a key factor in reducing one’s credit score, making it difficult to borrow from any lender in future.

7) Part prepayment is another good option

Always try to save money and go for part pre-payment of the loan amount. This will help you to save a significant amount on interest.

So, part pre-payment is a great option to live a debt-free life.

8) Take insurance for a large loan amount

Getting insured for a bigger ticket is a smart choice. If a borrower takes a loan to buy a car, it is convenient to have insurance as well. This is because the insurance company will pay off the left out debt to the lender, in case the borrower defaults.

9) Consider alternatives

Many lending institutions allow their borrowers to switch loans from their prior lenders. It is beneficial when a borrower switches during the early loan tenure.

10) Go for the best option

An applicant must pick the lending institution with care. A pool of NBFCs and banks give a variety of Personal Loans. Compare the lenders, read their terms and conditions and go for the one which accommodates all your needs.

So, once you know when to avail a Personal Loan, make sure to consider these tips before availing it.