As we all know, a personal loan is an unsecured loan and comes with a high interest rate. So, there are some tips that you should consider before you decide to take a personal loan. Go ahead, taking the personal loan only if.
- You do not own an asset/security against which a loan can be given to you. For example, if you have a fixed deposit, a secure loan is more feasible for you.
- You are aware of your financial situations/ cash flows and you are able to repay EMIs else you might get into a debt trap.
- There is an emergency for which you need money immediately. In such cases you can take a personal loan as they take lesser time for processing and requires minimal documentation.
It is better to take personal loans in situations where the needs are essential and cannot wait else taking personal loan should be the last option for you. Taking personal loans for meeting leisure needs can turn out to be expensive.
Make sure you calculate the cost-effective loan offer. Since personal loans are associated with high interest rates, compare the rate of interest and understand the annual interest rates offered. Then find out the total repayment amount you need to save with the offers before you opt for a personal loan of your choice.
Make sure you consider the processing fee and other charges that you need to pay upon applying for a personal loan.
Tenure and EMI
Analyze all personal loan offers. The first thing you should keep in mind is about the total money that you will be paying for taking a personal loan. The second thing to consider is EMI. You may get attracted to an offer that provides long tenure loan with low interest rate, but not all loan offers seem to be economical in the long run.