10 basic rules to get the best deal for personal loans
Personal loans are very popular. There are several reasons why these loans are so trendy right now. First of all, lenders don’t put any limits on how the money from a personal loan is used. Most of the time, personal loans are used to pay for needs or expenses like a long-overdue vacation, a family event, a down payment on a house or car, unpaid credit card bills or other long-term debt, and many other things. But you must get the cheapest personal loan to avail yourself of all the benefits.
Personal loans are unsecured loans, which is the second most important reason. This means that unlike with a car loan or a mortgage loan, you don’t need collateral. You also don’t have to complete nearly as much paperwork as you would for a car or a home loan.
Before you apply for a personal loan, you should look at the interest rates and other criteria. Read on to learn how to easily get the cheapest personal loan.
10 Basic Rules to Get the Best Deal on Personal Loans
Applying for the right loan amount is very important. Loan amounts should be based on how much one can comfortably pay back in the future. So, figure out your actual needs before deciding how much to borrow. Here are some tips to get the best deal on the cheapest personal loan.
10 Basic Rules to Get the Best Deal on Personal Loans
- Don’t borrow more than you need.
Even if you can get a loan for a large amount, resist the urge to borrow more than you can easily pay back. Paying back a loan is always harder and costs more than getting the loan in the first place. As a rule of thumb, the total amount you have to pay back each month shouldn’t be more than 40% of what you make each month. This way, you can secure the cheapest personal loan.
- Keep loan terms short.
On the ground, a longer term seems more appealing because it lowers your monthly payment. But because you keep paying more interest, it is much more expensive in the long run. Try to make the loan last for as little time as possible.
- Repay on time.
Your credit score, also called the CIBIL score, is based on how you’ve paid back loans in the past. Always pay your loan on time if you want to keep a good credit history. This makes it easy for you to get loans in the future at good rates. So, as a general rule, pay the full EMI amount before the due date.
- Don’t invest with personal loans.
Never invest or spend money you have to borrow. A personal loan’s interest rate is very high. Even if you were sure that your investments would pay off, they wouldn’t be able to beat the high rate of interest on the loan. On the other hand, most high-return investments depend on the market, which makes them risky.
- Avoid multiple personal loans.
If you take out a second personal loan without paying off the first one, credit bureaus will see this as a sign that you want more credit. Taking out multiple loans adds to your debt and hurts your credit score. But if you have more than one loan, you should get a big loan with a low interest rate to pay off all of them at once. This will help you raise your CIBIL score slowly and get the cheapest personal loans for emergencies.
- Calculate EMIs before borrowing.
Knowing your EMI before taking out the loan can help you decide whether you can manage it. Nowadays, most lenders that lend money have EMI calculators on their websites. This tool can determine your budget’s right loan amount, loan term, and EMI.
- Examine every detail.
While the cheapest personal loans are easy to get, there is more to them than meets the eye. Don’t just skim through the loan contract. Instead, take the time to read each clause and the small print. Each loan has its own rules and terms. You should know what you are agreeing to before signing.
- Choose lenders wisely.
To get the cheapest personal loans, it’s important to choose the right lender first. Before deciding on a lender:
- Check out their websites to see what their interest rates are.
- Find out the details, like if there are any extra fees or costs for paying ahead of time.
- Get all of the facts, compare them, and then make a choice.
9. Prepay if possible
When you pay off the loan early, you avoid paying extra interest. But most banks charge a fee if you pay off your loan early. Calculate the penalty you might have to pay if you pay off the loan early and compare it to the interest you would save. If you still think this is a good deal, prepay. When you pay off your debt early, your debt goes down, and your credit score goes up. Also, having one less debt is always nice.
10. Get insured
You should buy loan protection insurance if you take out a big loan. This insurance will cover your responsibility if something bad happens and your family has to pay for it. Several banks offer insurance to cover things like losing a job, getting hurt, becoming sick, or dying. You should buy this loan protection insurance, so you don’t have to worry.
The importance of the CIBIL score to get the cheapest personal loan
The CIBIL score ranges between 300-900. Most loans need a CIBIL score of 750 or more. If you want a loan, your CIBIL score should be around 900. Banks and NBFCs prefer to lend money to people with good credit.
You can get the cheapest personal loan if your CIBIL score is at least 750. Lenders prefer people with high credit scores, making it easier to get the cheapest personal loan.
Before giving you a loan, especially an unsecured loan, a lender will look at your credit score. They do this to determine if you can repay the loan. Borrowers with a high credit score can negotiate for the cheapest personal loan.
Wrapping Up
It’s easy to get a personal loan. Personal loans are one of India’s most common types of loans because people don’t have to put anything up as security and have so many benefits. Many companies offer the cheapest personal loan. Choosing the right personal loan lender is important to getting the best deal in India.
Visit Piramal Finance to learn more about how to get the cheapest personal loan and explore their products and services.