What Are the Important Rules to Follow When Taking a Personal Loan?

Personal loans can be taken for almost everything. If a person is willing to take a loan to finance their dreams, then this loan is their best option. People do indeed have dreams. However, these dreams come with a price tag. And to fulfil them, one at a time, you need to apply for loans. Availing of this loan has been made simple. There are banks and other financial institutions that offer the facility to avail of this loan. They have the facility both online and offline. It is really important to be able to find the best bank for a personal loan yourself. One must, however, adhere to a number of rules. One needs to keep reading this article to learn about such rules. 

• Knowing who is a credible lender: 

Currently, there are numerous lenders available on the market. There are banks, as well as many financial agencies. It is very easy for borrowers to get attracted to such agencies. It is so because they have many attractive offers. Choosing the best bank for a personal loan can be quite tricky. This is why one must conduct thorough research before committing to such loan offers. One must be aware of loan scams. 

• Borrowing only that amount that is needed: 

A person can be granted a loan for a huge amount. There can be an urge to borrow the entire amount. However, one must control their urge to borrow more. A person should never forget that they must finally repay the entire amount plus the interest. Repaying is always the tough part. There is also a thumb rule. It is advised that one’s loan repayment amount should not be more than 40% of one’s monthly income.

• The rate of interest must be carefully checked:

For a person, the interest rate is an important factor. It is a deciding factor on which they might select or reject an agency. There are many luring offers available at the rate of interest. The flat rate that is usually advertised can be quite misleading. Several hidden charges might be there that are not mentioned. This will surely increase the rate of interest. When the interest is calculated on the reduced balance, the actual is quite low. Such things can be avoided by using an EMI calculator. 

• Keeping the tenure of the loan as short as possible:

A long tenure can seem attractive. It means that the EMI is lower. However, they fail to do the long: term calculation. If a person carefully plans their finances, they will be aware that if they choose to return the money over a longer period of time, they will be spending more. This is the reason why it is advised to keep the tenure short. 

• Having a clear plan about the payment details:

There are various aspects of payments that need to be understood. If I need a personal loan, then I will be careful to check all the details thoroughly. There can be situations where a person might feel that they can repay the loan before the tenure. There are chances for that; however, if a person plans to do so, they need to pay a fee. It is known as foreclosure charges. It is recommended that you select a lender with a low fee for this. Some lenders also do not allow the option of repayment before a certain number of EMIs have been given. 

• Find out about the various hidden charges:

Personal loans come with a number of additional fees. After doing good research, it is important to find the best bank for a personal loan. Charges like processing fees, service fees, insurance charges, and many more are applied to one’s loan. The lender deducts all this amount from the loan amount and then transfers it to the customer’s account. Even the final EMI that is payable contains extra charges added to it. One can use the EMI calculator to better plan how these extra charges will be levied. If there is an EMI bounce, a certain penalty charge is to be paid. The penalty charges are also applied when a person cancels their loan request after it has been approved. 

• One must try to be regular with their repayment:

A credit score is determined by payment patterns. If the payment pattern is fine, one will have a good credit score. Credit history is also recorded with the help of repayment patterns. This enables a person to get a loan easily and get a better interest rate. This is why paying back the EMI before the due date is preferred. 

• Usage of the loan amount:

Certain personal loans specify the purpose for which the loan amount can be used. If I need a personal loan, I would thoroughly research beforehand. A rule document for loans will be provided that contains all such information. 

• One must not start another personal loan without closing one:

If a person decides to apply for a new loan without closing their existing one, it will leave a bad impression. The bureaus consider that person to be credit hungry. The credit score also gets negatively affected if a person has multiple debts. 

Conclusion

In this article, we have discussed the different rules for a personal loan. If a person plans to apply for this loan, they must keep the required rules in mind. A personal loan is a great option if someone needs to finance their big-budget dreams. If I need a personal loan, I would like to do a great deal of research before applying. If a person is looking for a good financial agency, then “Piramal Finance” is a good personal loan/financing option for buyers. They also have great blogs that one can read.