Gautam was looking for a personal loan to finance his home renovation project. However, he wanted to take the loan on proper terms so that the repayment would not become cumbersome for him. He, therefore, went through a very handy guide on personal loans and understood the DOs and DON’Ts clearly beforehand. Are you looking for such a guide as well? If you are, then just go through this article and you will also have a clearer picture in front of you.
DOs to remember when availing a personal loan
Let us begin with what you need to do when you apply for a personal loan:
1. Make a budget: You need to make a budget right at the outset. Assess your requirements to see exactly what your loan amount should be. Gautam needed about INR 3 lakhs to renovate his house and he applied for a personal loan of INR 3 lakhs exactly. If you borrow too much, you will end up with a larger debt burden unnecessarily.
2. Check your credit score: A personal loan is an unsecured loan. This means it is not given against any collateral. Your credit score, therefore, plays a vital role here. If you have a good and healthy credit score, you will get the loan in a smooth manner, at perhaps a lower rate of interest. So check your credit score before you apply. This can be done online, free of cost. If you feel the score is on the lower side, work to improve it before you apply for the personal loan. This will prove to be beneficial in the long run.
3. Look for the best rates: As mentioned above, the interest rate of your personal loan can be negotiated, so ensure you have the best rate for the loan you take. Negotiate with your loan provider and see if you can get a better rate of interest.
4. Select a convenient EMI scheme: Select an EMI scheme that is logical and easy to maintain. Review the EMI offered by loan provider and ask for modifications if you feel the EMIs are too high or even too low as per your financial capabilities.
5. Put the money to good use: Gautam was disciplined with his finances and used the money only to renovate his house. If you use the money you borrowed for some other purpose, you will end up needing more funds for the original purpose. So stick to the plan and put the loan money to good use.
These are the significant things that you must do when you take a personal loan.
DON’Ts to remember when availing a personal loan
Now that we know what needs to be done, let us learn the things you should avoid doing when taking a personal loan:
1. Don’t borrow to repay an old loan: One of the biggest things to avoid is taking a personal loan to clear another outstanding loan. Doing this will temporarily solve your repayment issues, but the defaults will once again catch up with the personal loan EMIs. If you aren’t in a financially stable position, work your way out of it before you get further pulled into the debt burden.
2. Don’t just focus on your bank: Banks have long been the popular personal loan providers. But nowadays, many reliable NBFCs also offer personal loan at some of the best terms. So rather than only relying on your bank, explore your options and see where you can get the best personal loan from at the best rate.
3. Don’t be in a hurry to repay: Last but not the least, never be in a hurry to repay your personal loan. You should not opt for unreasonably high EMIs just to close the loan quickly. This will soon turn into a problem and you won’t be able to afford the EMIs and will become a loan defaulter.
The final word
A personal loan is very helpful. You can get the most out of your loan if you follow the guidelines mentioned above. Take the loan properly, use it wisely and repay it with discipline. This will ensure you have a smooth experience and you will be able to take care of your financial requirements.