5 Tips to Make the Most of Your Personal Loan

A personal loan is a multi-purpose financial tool that can solve your immediate needs and also help in creating a good CIBIL score.

However, as easy as the personal loan may sound, you can also get into its trap, and instead of helping the personal loan may completely backfire you.

Thus, it Is important that you understand the need for a personal loan and use it to your advantage. 

Listed below are some tips that will help you make better decisions and also make the most of your personal loan. 

What To Check Before Taking A Personal Loan?

Before we discuss how to make the most of personal loans, let us see what one must consider when opting for a personal loan. 

1. Check for the best interest rate available: With various competitions in the market, the borrowers have a wide range of options to choose from. So, before you apply for a personal loan, get in touch with some of these vendors and check their interest rates. opt for the one which is offering the lowest interest rate.
2. Carefully consider the terms and conditions of the loan: The requirement for a personal loan varies for different lenders, so ensure that you read the terms and conditions of the loan before applying.
3. Choose fixed interest rate over floating interest rate: A fixed rate will have the same interest rate for the entire tenure of your borrowing, however for floating, the interest rate will vary based on financial trends and fiscal policies.
4. Monitor your CIBIL score and improve it for the best deal: Make sure to have a good CIBIL score so that you can take leverage of it and negotiate with your lender for the interest rate. 

Tips To Make The Most Of Your Personal Loan?

Only submitting documents for a personal loan is not important, many people do that, but only some know the trick to make the most out of it. Let us share the tip with you too. 

1. EMI Should Not Exceed 10% of Income: When you are applying, ensure that the monthly EMI you are paying Is not more than 10% of your income. If the EMI is too high, it will affect your future financial goals like saving for retirement, kids’ education, etc. You can use the online EMI calculator to know the exact number that you will have to pay. 
2. Make Regular Payments: Personal loan can help build a good CIBIL score but that is the case only if you can pay the EMIs on time and regularly. While there is no collateral attached to it, the financial institutions keep a track of your payment. If they feel you might default, they can also drag you to court. 
3. Keep the tenure Short: If you are opting for a longer tenure, you will end up paying more interest on the loan. So, as the amount is less, you can pay it off as soon as possible. This will also help improve your credit score and will free you of debt soon. 
4. Don’t Borrow for Frivolous Spending or to Invest: While the loan is available for all your emergencies, make sure you do not apply for frivolous spending or to invest in some financial product. A loan should be availed of for a good reason, such as remodeling your home so that the value can go up, or in case of an emergency.
5. Take Insurance for Personal Loans: Personal loans also come with insurance. In the case of some mishappening, the insurance companies ensure that the family does not have to bear the financial burden. Thus, it is a very smart idea to avail of insurance when you pick up a personal loan.

With so many ways in which you can reap the benefits of a loan, you might have a better picture of why you should take a loan, and how a loan can be a blessing in disguise for you.

So, make sure you keep these points in mind and accordingly make your decision. 

 

Tags: CIBIL score, Interest rate, personal loan

Category: Personal Finance