Technology has changed many things and banking and finance sector is also not untouched by this change. Today, SMS, phone calls and email offers of personal loans are common. Some say that they are offering personal loans at low interest rates while some say that they disburse money immediately. Many people fall into this trap and take a loan. But while taking a personal loan, there are many things that need to be kept in mind and clear to everyone. Some of these are whether personal loan is really needed? If yes, how much and which lender would be right to go for it?
Follow these 10 golden rules when taking a personal loan
Do not take excessive loans
Even though the technology has changed the entire system of taking and giving loans and it has become easy for the customer to take loans. But it does not make sense to take a loan without any special needs or to take an excessive loan. It is a pleasure to get a loan but repaying a loan is never a pleasure. The EMI is also dependent on the loan taken. ‘Always take as much loan as you can repay.’ One big principle of investment is that personal loan should be 10 percent of your monthly salary. Apart from paying EMI, you should also have money left for monthly needs.
Pay the loan on time
Paying late is considered indiscipline and it affects your CIBIL score along with penalty. CIBIL is an accounting of a person’s credit and financial history. And if you fill EMI late then it affects your CIBIL score. This affects the credibility of the customer’s credit and makes it difficult to borrow in the future. So always fill the EMI on time.
Keep the loan period as short as possible
Long periods are always breathtaking because it reduces EMI. But in this case the customer inadvertently pays more than the loan amount to the lender. When the period is short, the EMI is high but it is repaid in a short time and you pay a lower amount as interest to the lender.
Always take insurance on large loan amount
When the loan amount is high, it is very important to get loan protection insurance. If the customer fails to repay the loan then the loan insurance protects the interests of the customer’s family. Many loan insurance cover job loss, accident, permanent and temporary disability and even death.
In these cases the insurance companies pay the remaining EMI
Always choose the best option
There are various options for personal loans in the market. But rates and charges are different for each lender. Therefore, look around and compare before taking a personal loan. You can do this work easily on the Internet. Compare interest rates and fees of different banks. Then choose the best lender, whose merit, loan amount and tenure suits you.
Read the terms and conditions
For any type of loan, the customer has to sign a loan agreement. Many people sign it in a hurry and they do not read all the terms of the agreement. Every customer must understand that the agreement is very important and the terms and conditions of the loan are written in it. Not reading and understanding the agreement properly can lead to many difficulties and you may be shocked by the sudden expenses in the future.
Do not take personal loan for investment
Personal loans are unsecured loans with higher interest rate. If used for personal loan investment purposes such as stocks, shares or business, in which there is no guarantee of profit, it will be difficult for the customer to pay EMI. Therefore, it is better not to invest with a personal loan. Not only this, the basic idea of investment is to earn profits from the money invested. Therefore, the money you have taken through a loan will also attract interest. From the place where you have invested, if you are getting more money than the interest of personal loan, then in that case you are earning money.
Pay money in advance whenever possible
Save money wherever you can. With the deposited money, you can repay the loan before the fixed period. People get extra money through bonuses, incentives, hike, which you can deposit and repay the personal loan in advance. Repaying the personal loan ahead of time will help you save a significant amount on the interest that would have been paid to the lender throughout the tenure. By doing this, you will be debt free and the money that was going to pay the loan will be spent in other works.
Do not take a second personal loan until the first one is over
Applying for the second till the first loan ends means that the customer is hungry for money and has no financial stability. The lender may reject his application and CIBIL may also fall. This can make it difficult for the customer to borrow in future. But if the previous personal loan is at a higher rate of interest then it is prudent to take a new loan to eliminate it. If many loans are going on, then loan consolidation will not only help in reducing the burden of EMI but will also improve the CIBIL score.
Calculate EMI before taking a personal loan
Nowadays EMI calculators are available on many websites where it is easy to calculate EMI with a few clicks. By calculating EMI in advance, the future picture will be clear in front of you. To you it will be known how this will affect your monthly budget when loan repayment starts. Personal loan EMI calculator can be used to work on different versions of loan amount and tenure.