personal loans
Personal loans come handy when you need cash in an emergency, but you need to consider some important points to apply for a personal loan.

Personal loans can be helpful when you require some urgent cash or want to pay some higher interest debt, but today personal loan promoted to you for every need, whether you want to get married, go for a vacation, celebrate a festival- personal loans will be an honest companion with you 24*7.

Loan used to be considered as almost a sinnow it became a necessity for life,”

Now in half an hour, bank approve your application and disbursed the amount in your bank account. Only they require your basic documents, even you can get the personal loan disbursed much more than your actual requirement if you are eligible, only you need to say yes.

Personal loans

It is easy and simple to get this loan as it is an unsecured loan so you don’t need to give any guarantee or any collateral against the amount.

As it requires minimal basic documents to process the same, within a 1 week or 2 gets disbursed into account, you get 1-5 years to repay.

We must know what it is necessary before taking a personal loan. Today, we will cover those important points that we need to understand.

Purpose of  Personal loans

The most important point to understand that people often ignore the difference between the essentials and lifestyle based needs.

we should ignore the personal loan to the greatest extent possible.Interest rate and other charges are high on a personal loan.

while we have other option as well to tide over the problem of a cash crunch in an emergency like a

  • loan against gold,
  • loan against security
  • bank overdraft

These comparatively take less interest because of a bank having collateral against this loan. 

Repayment capacity

You should carefully evaluate your ability to pay PERSONAL LOAN EMI, as a thumb rule this EMI should not be more than 10% of your monthly salary i.e. an amount that you can pay without stretching your monthly budget.

Credit Score

Maintaining the financial discipline is very necessary, in the long term as it ensures to have a good financial record.

  • Healthy financial records improve the chances of being easily approved for the loans like a personal loan. 
  • If you have a good CIBIL score or sound financial record, then you can easily negotiate an interest rate with the bank. Bank would not have any problem to give personal loan in lower interest as your credit history is good.

Check Interest rate

Do not get carried away by the offer of a lower interest rate without understanding the full details. NBFC gives you offer to a lower interest rate but they offer a flat rate of interest, which actually charge you more interest amount compared to a diminishing rate of return. In Flat rate of interest, they charge on the full amount till the entire period of tenure, whereas in diminishing rate of return it is charged on the outstanding balance for the entire period of EMI.

Charges for the Personal loans

Interest amount obvious is a most significant cost on personal loans. But that doesn’t mean you should ignore other charges, typically it includes: –

ü  Processing fees: – It is charged for processing the documents, it can be between 0.5% to 3%. It is nonrefundable if your loan approved and can be partially refundable if a loan is rejected.

ü  Prepayment Fees: – If you prepay the loan, a bank might lose out on interest money acquired for your personal loan. A penalty is charged if you repay the loan before tenure and this can be up to 5% of the loan amount.

ü  Other Charges: – Bank might charge you other fees as well with these charges like documentation fee, duplicate statement, a late fee on EMI etc.

 Personal loan can be proved beneficial in certain conditions

  • If you have higher loan interest, which might charge you hefty interest then personal loan, it can be a replacement for that loan and can convert into EMI.
  • Large Credit card bill can be set off: – A personal loan can pay off a substantial credit card balance that is being rolled over a month.

Paying the minimum amount on a bill will not help you as interest is charged on the entire bill amount and it is very high usually, it can be 2.5% to 3% p.m.  

Also Read:-Mutual funds vs Stocks: – which option is better


Do not take a personal loan unless it is an emergency, even you can go with other option like a loan against security, gold loan where you will get low interest on loan, read the terms and condition in detail before signing the documents, and access the total cost and other charges which comes with it.

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