Navigating the world of personal loans can be challenging, but understanding the fundamental principles can make the process smoother. “Golden Rules for Personal Loans” offers essential guidelines to help you make informed decisions and secure the best possible loan for your needs. Whether you’re seeking funds for a major purchase, debt consolidation, or unexpected expenses, these rules will provide clarity on how to choose the right loan, manage repayment effectively, and avoid common pitfalls. Embrace these golden rules to ensure a financially sound and stress-free borrowing experience.
Check out these top golden rules before availing Personal Loans:
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Always Apply for the Amount Necessary
The banking systems are being highly customized as per the needs of the upcoming generation. The process of availing loans has become quite more accessible and much more convenient. However, this doesn’t imply that one would opt for availing the higher amount of funds. It is a matter of the fact that you need to repay the principal amount borrowed from the bank as well as the interest chargeable on the same.
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Decide Upon the Amount You can Repay Per Month
Repaying loans is never a desirable thing. However, it is something that can’t be avoided in any circumstances. As per the thumb rule, the EMI that needs to be paid for a personal loan should not be more than 10% of the total monthly salary. This is for the reason that you should have enough money for your expenditure after paying the EMI for loans.
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Arrange for Timely and Proper Payment of EMI
Banks charge a penalty on the late payments of EMI. In order to evade the penalties, you should try to pay the EMI’s in the stipulated time allocated. If at all you don’t pay the EMI’s in proper time, then the same will reflect in the credit history and bring down the CIBIL score. Low CIBIL score will significantly affect your credit score and will also make future loan sanctions difficult. In order to be on the safe side, it is always advisable to pay the EMIs timely.
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Keeping the Repayment Duration Short
It is a matter of the fact that low EMIs are always reasonable. However, paying the same for a longer period would definitely amount to paying a much higher amount. Therefore, if you are able to pay off the debts in a limited amount of time, then it is highly advisable to pay it as soon as possible. When the duration of repayment is reduced, the amount of interest to be paid to the bank is also reduced.
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Opt for Insurance Plans if you are Availing a more Substantial Loan Amount
If you are applying for a higher amount of loans, then it is always advisable to opt for an insurance cover. This insurance cover takes care of reimbursing the loan if the borrower and his family fail to pay off the debt. In case of any such incidents, the insurance company will pay the remaining EMIs.
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Compare Options
As you might be aware of the fact that there are several different banks and financial institutions which offer personal loans. It is always advisable to compare the interest rates of various banks before applying for a personal loan. Comparing interest rates of banks has been very easy these days. You can easily calculate the interest of different banks with the use of a personal loan calculator.
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Read the Documentation Carefully
It is a matter of the fact that most of the people don’t go through the loan documentation before signing it. However, it is always advisable to read all the terms and conditions before signing it. It is your right to know about all the terms of the loan that you are availing. You may also end up in great difficulties if you are not aware of any clauses.
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Calculate EMI Beforehand
When you are thinking about the amount that you should borrow from the bank, you should make use of various online EMI calculators to calculate the number of monthly instalments. This would help you in getting a clear picture of your eligibility for repayment.
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Never use a Personal Loan for Investment
Personal loans are considered to be one of the highly unsecured loans, and you need to pay for a higher rate of interest in the course of repayment. If you are thinking of investing a certain amount of capital in stocks and shares, then it is never a good idea to raise funds by means of personal loan. If things go south, then it will be challenging even to pay the EMIs back. Investments in stocks and shares involve high risk and utilizing the amount from personal loans adds more problems.
Read Also: Personal Loans Uncovered: Who Needs Them, Why, What They Are, and When to Apply
