Unlike all other loans that are provided for a specific reason such as purchasing a motor vehicle or the dream home, a personal loan can be taken for any reason. So, while such a loan is a great option in case of sudden requirement of funds, you should be aware of a few facts before deciding to apply for one.
1.The interest rate
Often, the interest rate charged for a personal loan is different from the rate charged for other loans. Make sure you keep an eye on the rate charged for the personal loan that you want to take. This will ensure that you do not put any unnecessary burden on your own finances when you opt for one.
2. Keeping credit score high
Whether you are eligible for a personal loan or not will depend on your credit score. A credit score is the rating that lenders and banks assign you on the basis of past debt payments. So, when you pay your credit card bills on time, your credit ratings improve automatically, and vice versa. For a personal loan, the lenders pay special attention to your credit score.
If your scores are not on the higher side, the best thing to do would be to take small loans and pay them back on time, prior to when you apply for personal loan.
3. The tenure of personal loans
A personal loan’s tenure can be anywhere between 1 and 5 years. This means that depending on the amount of money which you borrow, the monthly instalments can be difficult for you to bear if the tenure is not long enough. Thus, the best way to reduce the EMI is by taking a smaller loan, which would then result in much smaller monthly payments.
4. Purpose of the loan
If you apply for personal loan so that you can finance your child’s education abroad, then you may be better off with an education loan. So, before you take the personal loan, consider the reason why you need the money and if there are better loan options available.
5. Watch out for extra expenses
Some lenders will discreetly throw in an insurance policy along with a personal loan and have you believe that the two are not mutually exclusive. This will be an additional expense for you and you may not even know about it, till after taking the loan. So, read the terms and conditions of the loan properly before applying for the same.
1.The interest rate
Often, the interest rate charged for a personal loan is different from the rate charged for other loans. Make sure you keep an eye on the rate charged for the personal loan that you want to take. This will ensure that you do not put any unnecessary burden on your own finances when you opt for one.
2. Keeping credit score high
Whether you are eligible for a personal loan or not will depend on your credit score. A credit score is the rating that lenders and banks assign you on the basis of past debt payments. So, when you pay your credit card bills on time, your credit ratings improve automatically, and vice versa. For a personal loan, the lenders pay special attention to your credit score.
If your scores are not on the higher side, the best thing to do would be to take small loans and pay them back on time, prior to when you apply for personal loan.
3. The tenure of personal loans
A personal loan’s tenure can be anywhere between 1 and 5 years. This means that depending on the amount of money which you borrow, the monthly instalments can be difficult for you to bear if the tenure is not long enough. Thus, the best way to reduce the EMI is by taking a smaller loan, which would then result in much smaller monthly payments.
4. Purpose of the loan
If you apply for personal loan so that you can finance your child’s education abroad, then you may be better off with an education loan. So, before you take the personal loan, consider the reason why you need the money and if there are better loan options available.
5. Watch out for extra expenses
Some lenders will discreetly throw in an insurance policy along with a personal loan and have you believe that the two are not mutually exclusive. This will be an additional expense for you and you may not even know about it, till after taking the loan. So, read the terms and conditions of the loan properly before applying for the same.
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