Top 10 Basic Thumb Rules To Get the Best Deal for Personal Loan

personal loan

Personal Loan

 They are also the easiest type of loan one can get. You can apply for a personal loan for several reasons, such as home makeovers, vacations, weddings, or medical emergencies.

While looking for a personal loan online, apply only after looking at a series of factors that will help you get the best deal possible. Doing sufficient research and ensuring financial discipline are the leading ways to get the best online deal on your personal loan.

You can apply for a personal loan here:

  1. Don’t borrow more than you require:

When your credit score and income make you eligible for a huge loan amount, it can be tempting to borrow it. But never borrow more than you can pay back with ease. Borrowing money is always easier than repaying it, given the interest rates and additional charges that go with it. Make sure your loan EMI for the month is no more than 40% of your earnings per month. 

  1. Choose the shortest tenure possible:

Choosing longer loan repayment tenure is attractive as it helps reduce your monthly payments. But this means a greater interest amount and a larger overall cost incurred by the borrower. So make sure you choose the shortest tenure you can afford. 

  1. Make regular and timely payments:

Your consistency with payments plays a significant role in determining your CIBIL score. Make sure your payments are always on time so that your credit history remains strong. This will help you get loans at lower interest rates in the future. 

  1. Don’t use personal loans for investments:

Personal loans are generally designed for specific purposes, such as weddings, travel, etc. You can use personal loans for any legal purpose, but make sure you never invest or gamble using borrowed money. A personal loan is unsecured, which means it will have a high rate of interest. Any profits you make from stable investment options will not match up to this interest rate, which will keep you at a loss. What’s more, high-return investments come with high risks and are market-dependent. 

  1. Don’t take multiple loans:

Availing of multiple personal loans increases your current debt and will negatively impact your credit scores. If you have taken multiple loans or require a large amount, it’s better to consider taking one large loan with a competitive interest rate.

  1. Calculate your monthly installment before applying for a personal loan:

Before you take a personal loan, knowing the EMI you will have to pay each month will help you understand if you can afford this financial burden or not. An EMI calculator considers the loan tenure, personal loan rates of interest, and other factors to give you an exact picture. Taking this step will prepare you for the financial commitment to come and show you how much you can afford to pay, if at all. (check for interest rates)

  1. Analyze the fine print:

Applying and getting approved for a personal loan is always easy. But it’s never as simple as what the ‘ad’ says. Instead of breezing through the contract and loan documents, go through every clause in detail. There are multiple covert terms and conditions within every loan agreement, so make sure you clearly understand what you are agreeing to.

  1. Check your options:

Before you settle on a loan, make sure you compare it with as many websites and other loans out there as possible. It will help you understand all the options and see if you can save more when it comes to prepayment costs, processing fees, or interest rates. Make a decision after you have compared and studied enough options. 

  1. Prepay your loan if you can:

Personal loan prepayment takes careful planning. If you prepay a loan, you save significant costs on the interest you would have paid otherwise. However, banks do levy a loan prepayment fee which could come up to the same amount. Calculate the amount you will need to pay as a penalty if you choose to prepay your loan. Then compare this amount with the rate of interest you are saving. If you are profiting by loan prepayment, go ahead and do it. Personal loan prepayment will reduce your debt and also improve your credit score. 

  1. Think about getting insurance:

In case you are borrowing a large loan amount, it’s a good idea to get loan protection cover too. Getting insurance covers your liability should you have a mistimed accident that prevents you from making payments. Several financial companies also cover road accidents, job losses, disabilities, deaths, and more. 

Make sure you compare the personal loan rates of interest available before you decide to apply for a specific personal loan.

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