Follow These Rules When Taking Personal Loan

Personal Loan

How do you cope when faced with a financial shortfall? There are ways to overcome the problem. One relatively simple way is to take a personal loan from a bank or a non-banking financial company (NBFC). Nowadays, there are many lenders who provide affordable personal loans. Apply for them online or at one of the lender’s branch offices. Provide the necessary documents along with application form. The loan approval process is simple and quick nowadays.

The best thing is that a personal loan can be used for different purposes. Use it to purchase a household appliance, pay your tuition fees, fund a medical expense, or even travel abroad on a holiday. Simply visit the lender’s website to check out the available personal loans. Apply for a personal loan with NBFCs like Bajaj Finserv that provide easy repayment terms.

However, you should not be in a hurry when applying for a personal loan. Gather up some knowledge about personal loan applications. Here is a look at the rules to follow when applying for a personal loan: 

Rule #1: Choose The Right Lender 

Don’t get drawn in by what seems like the best bargains. Compare the loan amounts being offered to you as well as the interest and other charges. For instance, lenders usually charge a processing fee of around 2% of the loan amount. But the actual rate might vary across lenders. So, it is a good idea to consider a range of different lenders and shop around a bit.

It may help to read customer reviews in order to find lenders with the best customer service and quick loan processing. Do your due diligence before making a choice.

Rule #2: Calculate your actual interest outgo

This is a crucial factor when taking a personal loan. By all means, you should look for personal loans at low interest rates. But make sure to consider your actual interest charges. Keep in mind that the interest rate is calculated on the outstanding loan value each year. Suppose you borrow Rs.5 lakh for three years at 12% interest, your total interest liability will be Rs.97,857. 

So, do not just calculate the interest on the principal amount that you take. That would amount to just Rs.60,000. Keep in mind that you will be repaying the loan via equated monthly instalments (EMIs). So, the interest will be calculated on the reducing balance. 

Rule #3: Check if the EMI is affordable

As a thumb rule, keep your EMI at 30–35% of your monthly income. Ensure that the repayments are affordable for you. It helps to prepare an outline of your monthly income and expenses as well. This will help you estimate the amount you can afford to repay every month.

You could try using a personal loan EMI calculator to check whether the EMI amount is manageable. In case your EMI amount seems rather high, go in for a longer tenor. Your EMIs will be spread out over a longer term and will decrease as a result. However, since the tenor is longer, your interest outgo might go up.

Rule #4: Borrow the amount you actually need 

Before you apply for a loan, think about why you need the money and how much you actually need. Say, you need to make a down payment on a car worth Rs.7 lakh. Your down payment would typically be between 10% and 20%. So, it could range between Rs.70,000 and Rs.1.4 lakh. Factor this actual amount in when taking a personal loan. If the maximum amount you have to pay is Rs.1.4 lakh, do not seek a loan of Rs.2 lakh. Remember, you will have to pay back the amount eventually.

Summing up

You now know the basic rules to follow when getting personal loans. Apply for a loan from the lender that ensures the most hassle-free processing and conducive term. You could also check out the pre-approved deals available to you from NBFCs like Bajaj Finserv. Just share a few basic details and check out your pre-approved offer. Such pre-approved personal loans simplify the loan process and help you save on time.To know more about the personal finance Visit Loan Trivia

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