With ever-increasing rates and fluctuating economic conditions, it's getting difficult to buy what we want. While there is an option to borrow money from someone, other quick financing options are also available - like personal loans and top-up loans.
Taking a personal loan is a convenient and quick funding option. But you should be mindful about the tenor as the interest adds up the longer you take to repay. Even if you take a top-up loan, then you need to be secure about your income and the ability to repay the loan. Ideally, your EMIs should be less than 40% of your income.
Many people tend to take loans even when their income is low, which leads to them facing a challenging situation in paying back what they've borrowed. Here are some tips to help you avoid getting in such a situation.
Pre-pay is the smart way
Prepayment means that you pay a higher sum of money towards the loan. This will help reduce the loan's tenor and the principal amount you owe to the financial institution. Hence, if you have any form of idle or unused cash, it would be sensible to use it towards pre-paying the loan.
Additional read: How to improve your CIBIL score
Get loans with shorter tenor
The tenor of a loan varies with different lenders and their respective schemes. Choosing a short tenor for your loan will enable you to manage your finances efficiently. This means you'll have to pay fewer EMIs, and you will get freedom from the stress of repayment sooner. Loans with long tenor prolong the payments, and over the long term, can adversely affect your income and savings. However, choosing a short tenor does not mean that you stress yourself financially more than you can bear.
Do not delay EMI payments
Regular and timely EMI payments guarantee that your principal amount is repaid faster. If you fail to maintain the frequency of payments, the EMIs will pile up. Delaying EMIs could lower your credit score, which could hamper your chances of taking another loan in the future.
Do not borrow more than you can repay. This involves viewing your fixed expenses, observing your monthly expenditure over the last year or two, and considering your job security, among other factors. Over-borrowing can cause you to pay interest for an amount you didn't require at all.
Additional read: How to use a personal loan calculator
Read terms and conditions carefully
Before taking a personal or a top-up loan, perform an in-depth analysis of the interest rates, monthly EMIs and also go through the terms and conditions. Get a loan when you are convinced that you have the financial backing needed to pay the EMIs on a timely basis with some amount left over for any emergencies that may occur.
With these things in mind, you can never go wrong with not just personal but any loan. Bajaj Finserv offers you a personal loan with competitive interest rates. In addition, you can check their pre-approved offers on personal loans, home loans, EMI finance on different products, and other financial services. Not only does this simplify the process of availing of financing, but it also helps you save on precious time.
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