Personal loans are easy to obtain, and many banks and non-bank financial institutions (NBFCs) provide them at low interest rates. Consider the following points before applying for a personal loan to see if a personal loan is the best option for you.
Quick access to finances is a benefit of personal loans. They don't need any collateral, and no questions regarding the end customer are asked. If your credit score is above average, you have a decent chance of getting your loan application accepted and the funds in your account within days.
What Should You Consider Before Getting a Personal Loan?
No. of EMI’s you pay: Don't take on more debt than you can afford to repay. If you do, you will fall into a financial trap. Take out personal loans only if you don't have a lot of debt on your credit report. You should be able to keep up with the repayments on all of the loan.
Reason for your loan: First, assess whether these costs may be postponed until you have adequate money. If you do decide to take out a Personal Loan in India, the most important thing to ask yourself is whether you will be able to keep up with the EMIs and avoid defaulting. If you answered yes, you can apply for a loan and realize your aspirations.
Taking a Personal Loan for Home Purchase: You have submitted an application for a home loan and have a high chance of being approved. The loan amount, however, would not cover the entire cost of the house. A Home Loan will cover around 80% of the cost of the house. You must now raise funds for the down payment.
If you take up a Personal Loan for this, keep in mind that you'll have to pay EMIs on at least two loans: this Personal Loan and the Home Loan.
If you do decide to take out a Personal Loan because you have the financial means to repay it, don't forget to take advantage of the tax benefits. You may be eligible for a tax exemption on the interest component of your loan repayment if you can present documentation that you used the Personal Loan for the purchase or repair of a residential property.
Debt consolidation: If you have a lot of credit card debt and other high-interest loans, you can look for a Personal Loan in India with a lower interest rate and use it to pay off your high-interest bills. You'll only have to pay back this one debt. However, a high credit rating is required to obtain a Personal Loan with low interest rates. If you're seeking to get out of debt, think about your options.
When taking out a personal loan, keep in mind that the interest rate will be considerable. Borrow only as much as you need to cover an emergency or a necessary expense. Do not take out too many loans at the same time. To avoid falling into a debt trap by trying to live beyond your means, practice financial discipline and stick to your repayment schedule.