Banks and NBFCs offer a personal loan to help you with money in times when you need funds in an instant. Some offer lower rates of interest. Others let you apply online for Personal Loan and while some offer an easy application process.
Today, many lenders take less than a minute to approve and disburse loans. Although there are many advantages of taking a personal loan, it pays to be prudent. First of all, you’ll have to decide whether you’re in need of money. There’s no point in taking a personal loan to take advantage of tax concessions.
So, if you’re willing to borrow, here are a few tips to consider to get a personal loan.
Borrow What You Can Repay:
The first rule is that you should not borrow what you cannot repay. According to financial experts, the EMI must not exceed 15 percent of the total monthly income. Your monthly expenditure towards all the loans put together shouldn’t cross 50 percent of the monthly income.
Banks and other financial institutions are falling over each other to attract customers. This makes the personal loan process simple. But you shouldn’t take a loan because it can be availed easily. When the EMIs take up a large share of your monthly income, other goals like children’s education and medical expenses are affected. You may end up compromising on retirement planning.
Keep The Repayment Period as Short as You Can:
The maximum tenure for the repayment of loan is 30 years. The general rule is that the more the tenure, the lower the EMI is. This makes it tempting for borrowers. But this is one of the myths about personal loan that should be debunked. It’s wise to take the loan for the shortest span that you can afford. This is because the interest will be too high with a long term loan. If you go for a loan with a tenure of 10 years, you will see that the interest paid is about 57 percent of the borrowed sum of money. If it’s extended to 20 years, the interest can shoot up to 128 percent.
Make sure you pay off EMIs in time:
When you have taken a personal loan, it pays to be disciplined. Whether you’re required to pay off a credit card bill or a long-term debt like a home loan, it’s imperative to ensure that you don’t miss an EMI. If you miss a Personal Loan EMI or delay a payments, it can harm your credit profile. This can hinder the chances of getting the loans in future.
Never borrow to spend unreasonably or make any investments:
This is the basic rule that you should never apply online for a personal loan for making any investments. Even the safest form of investments such as bonds or fixed deposits can’t match the amount of interest that you pay for the borrowed sum of money. The investments that offer higher returns like equities are volatile. When the condition of the market declines, you’ll end up incurring losses and get trapped with heavy EMIs as well. It’s also wise to refrain from taking a loan for fulfilling some wishes which could have been saved for later.
Banks and NBFCs will push you to get the loans to buy whatever you want. But you must weigh your steps before taking any decision.