An unsecured mode of finance, personal loans serve multiple objectives. Be it going on a vacation, undertaking a home renovation, buying an expensive household item, or funding marriage-related expenses, a personal loan is a prudent financing option. However, there are certain questions you need to ask before availing of this loan.
How much loan do you need?
Before availing of a personal loan, you need to figure out the loan amount. Gauge your needs to know your exact requirement. Being an unsecured loan, your credit score plays a critical role in determining the loan amount. Opt for a loan that you can repay quickly without compromising on your other financial goals. Ideally, the EMIs shouldn’t be more than 40% of your monthly income.
What’s the loan tenor?
The tenor varies across lenders. Most lenders offer flexible tenors to ensure you can repay the loan at your convenience. Compare the tenors provided by various lenders online before taking a call and opt for the one that best aligns with your goals and repayment capacity. The tenor you choose affects your monthly EMIs. To estimate monthly EMIs, you can use a personal loan calculator and plan your tenor accordingly.
What’s the rate of interest?
This is another vital question you need to ask before availing of an online personal loan. The rate of interest has a say on the monthly EMIs. Compare interest rates offered by different lenders online before making a final decision. The rate of interest depends on your credit score, loan amount, and tenor among others.
Should you opt for a loan from a bank or NBFC?
While earlier, banks were the primary source for personal lending, today, many non-banking finance companies (NBFCs) are also offering personal loans. Adopting an innovative approach, some of the leading NBFCs are offering Flexi personal loans. Here you pay interest only on the amount you utilise from your approved loan limit.
Do you have any pre-existing loans?
If you are serving any pre-existing loan, the same will directly impact your repayment capability. Lenders will factor this while sanctioning the loan amount. While applying for a personal loan, when you are serving pre-existing loans and liabilities, make sure you’ve paid the EMIs of the present loans on time.
Additional Read: Things to avoid while taking personal loans
Comparing various offerings and understanding the fine print of the loan document will help you get a good deal.
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