Rahul wanted to take his wife for a romantic holiday to Mauritius, but his bank account wasn’t permitting him to do so. As he had postponed this holiday for many years, he decided to take a personal loan and go on the holiday this time without fail. He was a hardworking person and managed his finances well. As a result, he took all the precautions and followed the golden rules when he opted for the personal loan. He was precise with the repayments too. This made the entire process smooth for him. If you too need to address a personal issue with some added finances, consider taking a personal loan. Take a look at this article to know how to go about the process.
Golden rules for personal loans
When taking a personal loan, keep the following rules in mind at all times:
- Borrow only if you need: The most important rule of taking a personal loan is that you should borrow only when you need the money on an urgent basis. Never be careless about this and borrow if you really don’t need to. Assess your needs before you apply for the loan. Check the severity of the situation and if there aren’t any other sources available, then opt for a personal loan. A personal loan is a great financial aid, but if you are irresponsible about it, it will turn into a steep financial burden for you.
- Don’t borrow to invest or repay another loan: You may want some easy cash to invest in a lucrative fund. You may also look for a simple way to repay a loan that you have not been able to close on time. while you can apply for a personal loan at such times, it is highly recommended for you to stay away from such practices. Never invest with the money you borrow through a personal loan. It will not work in your favor and you will soon find yourself struggling to manage all your financial accounts simultaneously. Similarly, do not take a loan to clear another loan as that will just transfer your financial liability and not bring you any real solution.
- Check your credit score: Always check your credit score before you approach your personal loan provider. If you have a good credit score, the loan may be given to you at a better rate of interest and vice versa. So if you find you have a lower credit score, you can perhaps clear a few dues, repay certain loans and work on improving the credit score before you apply for the personal loan.
- Select an appropriate EMI: Everyone likes to become debt-free at a quick pace. However, in your hurry to repay the loan, do not opt for an unreasonable EMI structure. your EMI should be affordable and small enough to suit your pocket. Analyse your financial health and then select a suitable EMI for repaying your personal loan.
- Prepay if possible: If at any time you come in possession of a large sum of money (inheritance, work bonus, a sale of property, etc) you can prepay the loan and close it. The longer you continue with the loan, the more you end up paying in interest. So try to shorten the loan duration if it is possible for you to do so in a valid way.
- Read the fine print: Last but not the least, you should make it a rule to read the loan documents before you sign on the dotted lines. Do not take your loan in haste without understanding what is being offered to you. Understand the loan terms, the EMI structure, the interest rates, the repayment clause, the fee structure, etc. This will help you to get a better idea of what the loan provider expects from you while they help you with the financial aid.
These are the most significant rules that you must remember when taking a personal loan. Make a mental note of these rules and you won’t have too many worries in finding your ideal loan.
Indeed, a personal loan is a great financial support. However, you must first understand the rules and clauses associated with a personal loan and then proceed to apply for one. Keep the points mentioned above in mind and approach a personal loan with prudence. If you really need the loan and you meet the qualification criteria, your loan provider will be more than happy to disburse the loan to you.