5 things to keep in mind before taking a personal loan for the first time

A personal loan may be required for home renovation or sudden medical expenses when it becomes a much better option during a financial crisis.

Banks and other financial institutions have changed the interest rates of personal loans. Taking a personal loan is easy as it does not require any collateral or security to be deposited, like gold and home loans. Apart from this, we can use a personal loan for any purpose, compared to other loans.

We can take personal loans for home renovation or sudden medical expenses, during a financial crisis. It becomes a much better option when you have neither collateral nor anything to pledge. If you are going to take a personal loan for the first time, then keep these five things in mind.

Take as much personal loan as you can repay

Banks also offer pre-approved loans based on the repayment capacity. It requires less documentation, so it looks attractive. However, do not take too many personal loans on this basis, take only as many loans, which you can repay easily. While deciding the loan amount, consider the EMI so that it does not hinder the financial goals.

Keep in mind the payment term.

Also, keep in mind the payment term. If you keep the loan repayment tenure longer, then in this situation the EMI may be less, but the interest will be higher.

Choose the lowest interest rate plan.

Personal loan rates are higher as compared to other loans because of the high risk involved. Its rate ranges from 9 per cent to 24 per cent. The higher the interest rate, the higher will be the EMI to be paid. Therefore, take a personal loan, which has the lowest interest rate.

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Know these terms also

Generally, people in the age group of 21 to 65 years can take a personal loan. For this, the minimum monthly income (net) should be between Rs 15,000 to 30,000. The minimum work experience of the borrower should be one year in the current job or two years in aggregate. If your credit score is good, you will get a cheap and easy loan. The interest rate is different for salaried and self-employed people.

Pay on time, or else there will be a problem in future

Make timely repayment of any type of loan, especially personal loan. Failure to do so will not only damage your credit score but also affect your ability to take loans in the future. Keep loan requirements below your repayment capacity. The financial burden will not increase while paying EMI.

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