5 Essential Tips to Consider Before Taking a Personal Loan
Posted on Friday, April 28th, 2017 | By IndusInd Bank
Life is uncertain and you rarely know when you might need some extra money to help cover your expenses. That is where a personal loan comes into the picture. Taking a personal loan during such times can help you tide over financially. However, there are a few things to consider before you opt for that loan. Here are 5 essential tips to keep in mind before you get a personal loan:
- Compare Banks
Before you decide on one loan, it is best to first check what other banks or lenders are offering. Interest rates vary from bank to bank, and the lower, the better. The best way to get an optimal personal loan is to compare interest rates and EMI options. It also helps to consider other charges, which often include processing fees, bank charges, verification charges, and a range of other fees.
- Check Interest Rates
Don’t get swayed by the offer of a lower interest rate. Lower interest rates may not always be good indicators. What banks often omit to mention is that these interest rates are applicable for flat rates. The best interest rate you can look for is a diminishing interest rate, which means you pay interest only on the outstanding loan balance, as compared to a flat rate, where you pay interest on the entire loan amount.
- Use Your Credit Score to Your Advantage
You can make use of your high credit score to get a better interest rate from banks. Various banks offer different interest rates to borrowers based on their credit scores. On an average, a strong score is around 700. With a better credit score, you can ask banks for a lower interest rate since you are less of a credit risk than someone with a lower credit score.
- Don’t Over-Shop for Loans
When you apply for a personal loan, you leave something called a footprint on your credit record, which lenders look at before approving a loan. If you over-shop, i.e. you apply for too many loans in a short span of time, then lenders will view you as a credit risk. This may result in you getting charged a higher interest rate.
- Don’t Take on More Than You Can Afford
Before you apply for a personal loan, always consider your financial standing. Look at how much you can borrow and whether you have the ability to repay the amount on time. Some lenders will try and offer more than you can handle, which means that you might get stuck in a debt trap, or get stuck paying interest for borrowing more than you needed in the first place. It is best to be cautious of such situations.
With a thorough understanding of these tips, you will be able to choose a personal loan best suited to your needs. Visit the IndusInd Bank website and opt for our personal loan with competitive interest rates. Apply for the loan online today.