Personal loans are popular because they are fast and need no collateral. That convenience comes at a price, since interest rates are higher than for home or car loans. Used well they are useful. Used carelessly they become a burden. Here is what to check.
1. Is this the right kind of borrowing?
A personal loan makes sense for planned or unavoidable expenses such as medical needs, a wedding or consolidating costlier debt. It is a poor choice for things that can wait or for investing, since the interest is certain and the returns are not.
2. Compare the effective cost
Look past the headline rate. Processing fees, GST, insurance add-ons and foreclosure charges all change what you really pay. Ask for the full cost across the tenure and compare lenders on that number.
3. Match the EMI to your budget
Use a tenure that keeps your EMI comfortable. A longer tenure reduces the monthly burden but increases the total interest. If your income is likely to rise, a shorter tenure may be fine.
4. Read the foreclosure and part-payment terms
If you may repay early, check whether there is a charge and from when it applies. Some lenders allow part-payment after a few EMIs, others do not.
5. Borrow only what you need
Lenders may approve more than you asked for. Resist the extra. The loan amount you take is the amount you will pay interest on.
6. Watch out for these
- Offers that ask for an advance fee before disbursal.
- Apps or callers who are not clearly linked to a regulated bank or NBFC.
- Pressure to sign quickly without sharing the loan agreement.
Approval, rate and tenure always depend on the lender's eligibility criteria and policies. Our team can help you compare options from different banks and NBFCs for your profile.
FinMighty TeamInvestment, loan & insurance advisors, JaipurThis article is for general information only and is not personalised financial, tax or legal advice. Please see our Disclaimer.
