Taking a personal loan is a convenient and quick option when a financial emergency arises. While it is easy to apply for a loan, paying it back requires some planning and financial discipline. Ideally EMI’s should not constitute more than 40% of one’s income. The purpose of a loan is to ease your financial burden and not add more stress. Therefore, it is important to consider certain important factors before applying for a loan. These include the tenure of the loan, assessing your repayment ability, the amount of EMI or Equated Monthly Installments, the pre-payment policy etc. Let’s take a look at these in detail.
- Prepare a monthly budget – It is important that before taking a loan you prepare a budget to understand what your monthly expenditure is. Then find out which expenses can be cut down or slashed. Also explore other income opportunities if needed. You should aim to have a surplus amount after paying off the EMI’s considering all your expenses.
- Compare and shop around – Before applying for a loan it is advisable to check out all the options available in the market. With many banks and NBFC’s offering credit options, the consumer has enough choices. Check out all options, the interest rates and compare EMI’s. Also assess the flexible interest loans versus fixed rate of interest. Even a slight reduction in EMI can give you a breather. Read the terms and conditions of the loan document thoroughly before you apply.
- Maintain a good credit score – Credit scores range between 300-900. It is important to maintain a high credit score to increase your chances of getting a loan and better interest rate. Pay your pending bills and previous loans before applying for a new one. This will increase your credit score and give you better options when applying for a new loan.
- Choose a shorter tenure – Always opt for loans with a shorter tenure. Choosing a loan with a shorter tenure will help you manage your finances efficiently. A shorter tenure means less EMI’s. While loans with shorter tenures are better it is also important to keep the repayment amount in mind. Choose a loan with a short tenure which has an EMI that you can pay without adding stress to your finances.
- Never miss an installment – Regular, on-time and full EMI payments ensure that your principal is repaid faster. If you miss your monthly payments, EMI’s will pile up and add to your financial burden. Moreover, delayed EMI’s could negatively impact your credit score, thereby lowering your chances of getting a loan in the future.
- Explore options to pre-pay your loan – It is not necessary to continue a loan to its full tenure. If you receive a lump sum amount as a gift, bonus etc it is worth exploring the pre-payment option. It is important to check out the pre-payment clause and do a cost- benefit analysis before taking this decision.
Unsecured personal loans are a useful tool to overcome a financial crunch or emergency. While it may be easy to apply for one, it is important to keep in mind that one borrows only what is needed and pays the installments responsibly.
MyShubhLife offers various solutions for all your credit needs. Choose from several options depending on your situation. Whether you are a salaried individual or a business owner, we have products for everyone. Apart from loans MyShubhLife also offers saving and investment options like E-Gold, Insurance and Early Wage Access. Begin with a paperless and instant application process and get your loan approved in easy steps. Log onto the MyShubhLife app to learn more.