A personal loan helps solve your short-term financial needs like home renovation, making large purchases or meeting wedding expenses. Some of the best banks for a personal loan also offer features like easy repayment options and zero collateral. Such features make personal loans a valuable option for meeting personal finance needs.
Before you hurry and apply for an instant personal loan online, here are five important tips to take the right decision.
Ensure that the EMIs are affordable
A thumb rule of availing a personal loan is that the EMIs should be less than 10% of your monthly income. If they are higher, they may impact your daily expenses, or other life goals such as retirement planning and saving for your child’s education. You can take the help of a personal loan EMI calculator to get an idea about the monthly instalments.
Ensure that you pay on time
Missing a loan EMI may attract a penalty. Personal loans can only help boost your credit score if you make payments on time. Financial institutions keep a track of your loans to gauge your credibility. Having a good credit score can help in easy loan approvals in the future and make you eligible for discounts as well.
Check the tenure
The tenure of a personal loan is typically lesser than other loans, such as a home or auto loan. It is advisable to keep the tenure short. The shorter the term, the lesser is the interest you will have to pay. Paying off the loan quickly ensures that you have lesser liabilities. It also allows you to concentrate on other life goals.
Get a loan for the right reasons
Opting for a personal loan for spending on yourself or investing money could be disastrous. If you are planning to invest the money in a financial product or a scheme and paying off the EMIs with the returns, you might be making a mistake. Business returns heavily depend on the market. Even market-linked funds do not guarantee you fixed returns. Therefore, you need to ensure that your reasons are justified, and you can pay the EMIs on time before you apply for a personal loan.
Get the loan insured
You can also insure your personal loan in case of an unfortunate event before the repayment of the entire loan. Banks offer to insure the personal loan for a premium. Getting insurance for the personal loan can be a sound decision. It saves your dependents from financial distress if something happens to you before the loan is repaid.
IDFC FIRST Bank offers personal loans with a hassle-free application process, competitive rate of interest, and minimal charges.
Click here to know more about IDFC First Bank Personal loans.