10 Rules for Beginners to Follow While Availing of a Small Personal Loan

 

Most people prefer to take out small loans to fund their personal and urgent financial requirements. With no dearth of financing options available in the market, there are some critical factors a borrower must follow before applying for a small personal loan.

 

Availing a personal loan to meet various financial goals, such as home renovation, medical treatment, pursuing higher studies, debt consolidation, etc. is not an uncommon practice. With the proliferation of technology, the process of obtaining small loans is also becoming easier for the common people. However, before zeroing in on any such funding offer, one must be familiar with the 10 golden rules of availing of small personal loans.

What is a Personal Loan?

Before getting into the rules, let’s cover our bases with personal loans first. A personal loan is a lump sum amount of money that you can borrow from a financial institution, to meet your diverse personal expenses. Such loans can be either secured or unsecured, meaning you may or may not have to pledge your assets to borrow money. You can repay the borrowed amount over time through instalments. The personal loans available in the market differ on several key points, including repayment terms, amount, interest rates, etc. This is where loan seekers need to exercise their discretion.  

Now when you are clear on the concept and willing to borrow money in the form of a small personal loan, it is time to learn those 10 rules:

1. Borrow only what you can Repay

While it feels great to get a high amount of loan very easily, repaying your dues is a matter of great importance. Always remember that EMIs on personal loans depend on the borrowed amount. Thus, it makes sense to take out a loan amount that you can foresee repaying easily in the near future. It will also be a wise decision to make use of an online rate of interest calculator, before opting for any loan.

2. Repay on Time

Failing to repay on time will bring you penalties and damage your CIBIL credit score. CIBIL score is the standard by which your creditworthiness and financial background are measured. If it goes down, well, so will go down your borrowing credibility. It will be difficult for you to borrow money in the future.

3. Go for a Short Tenor

In the case of small loans, it is advisable to go for a short tenor. Yes, the EMIs will be a little high, but you can repay the borrowed amount faster, and therefore pay less interest.  

4. Compare and Choose

As mentioned earlier, there are many options available for small personal loans. But you need to look around and compare their offers in terms of metrics, such as desired loan amount, repayment tenor, interest rates, etc. Then choose the lender that suits your requirements and capabilities.

5. Read The Fine Prints

You must thoroughly read the terms and policies of your loan agreement before signing. If you do not pay attention to the fine prints, you might get undesirable surprises in the form of unexpected or hidden charges.

6. Don’t take Personal Loan for Investments

Never use money obtained through a personal loan for investment purposes. There’s no guarantee of profit and if you incur a loss, it would be difficult for you to repay the loan.

7. Prepay if you can

Save money and prepay your loan if you can. It will save a lot of money on the interest which you would have to pay throughout your tenor.

8. Debt Consolidation

If you have multiple outstanding loans, you can take loans with lower interest rates to pay off previous ones with higher rates of interest.

9. Calculate EMIs before sealing the deal

Just like a rate of interest calculator, you will get online EMI calculators on the websites of the leading money lending institutions. Calculate your future EMIs to get a clear picture of your future repayments and monthly budgets. It will also help you to work out different versions of the tenor, loan amount, etc.

10.  Keep your family in the loop

Before applying for a loan, run it by your spouse, adult children, or any other family member. The repayment will have an impact on the entire household. Moreover, if you are taking a loan for your kid’s higher education, they must also bear some of the responsibilities in the future.

Remember to calculate the applicable interest with a rate of interest calculator before applying. You can check out the pre-approved offers by Bajaj Finserv on their various products, including personal loans, home loans, credit cards, etc. by submitting your name and contact details.

Must Read: Different Types Of Small Personal Loan