Looking To Apply For A Personal Loan: The Essential Do’s And Don’ts You Must Keep In Mind

Posted on Thursday, March 9th, 2023 | By IndusInd Bank

Personal loans can be a helpful tool to manage your finances, whether you need to consolidate debt, pay for unexpected expenses, or fund a major purchase.

However, before you apply for a personal loan, it’s important to know the do’s and don’ts to ensure you make a smart financial decision. In this blog, we’ll go over the top do’s and don’ts for taking out a personal loan.

Here is the list of some important Do’s and Don’ts before taking out a personal loan:

The Do’s

Do: Shop Around for the Best Rates

When you’re looking out for a personal loan, don’t just settle for the first offer you receive. You should search for multiple offers and compare rates from the lenders to find the best deal. Look for the offers with the most competitive rates, low fees, and flexible repayment terms. You can use online personal loan emi calculators to help you understand the repayment terms better and plan your finances accordingly.

Do: Check your eligibility before taking the loan

Assessing your credit score and utilizing a personal loan eligibility calculator will help you determine the amount of credit you are eligible for. You should be aware that the final amount may change depending on the policies of the lenders, but it will give you a good sense of direction in making your final pick for the personal loan lender.

Do: Read the Fine Print

Before you sign on the dotted line, make sure you read the fine print of your loan agreement. You must understand the terms and conditions of the personal loan, including the applied interest rate, any kind of hidden fees, and the repayment terms. Make sure to take note of any potential penalties for missed payments or early repayment. If you have any questions or concerns, don’t hesitate to ask your lender for clarification.

Do: Have a Plan for Repayment

Before you take out a personal loan, make sure you have a plan for repayment. It’s very important to know how much you’ll need to pay each month and ensure that it’s within your monthly budget. You must consider how long it will take you to repay the loan and factor in any potential future expenses that may impact your ability to make payments. Having the right repayment plan in place can help you avoid missed payments and late fees.

Do: Use Personal Loans Responsibly

Above all, use personal loans responsibly. Only borrow what you need and have a solid plan in place for repayment. Make your payments on time each month and avoid missed payments or defaulting on your loan. Remember, repaying on time can help you improve your credit score and establish a positive financial reputation.

The Don’ts

Don’t: Borrow More Than You Need

While it may be tempting to borrow money which might be more than you need, it’s important to remember that a personal loan is still a loan. You’ll have to pay interest on the amount you borrow, so only take out what you need to avoid accruing unnecessary interest charges. Borrowing more than you need can also lead to a higher monthly payment, which can put a strain on your monthly budget.

Don’t: Use a Personal Loan for Non-Essential Expenses

Taking out a personal loan for a luxury purchase can lead to unnecessary debt and interest charges. Instead, you should use it for essential expenses such as personal loan for medical expenses, for home repairs, education or debt consolidation.

Don’t: Take Out Multiple Loans at Once

You must avoid taking out multiple loans at once. Not only can it lead to financial strain, but it can also harm your credit score. Each time you apply for a loan, it triggers a hard inquiry on your credit report, which can lower your credit score. Additionally, having multiple loans can make it difficult to keep track of your payments and repayment terms, which can put a heavy burden on your wallet.

Don’t: Borrow From Questionable Lenders

Nowadays, people can apply for instant personal loans on many different platforms and apps. Though these offers could seem extremely attractive to you, they have the potential to be scams that steal a person’s identity and cash. So, it is advisable to choose lenders only after thoroughly researching their reputations or from trustable banks and to stay away from offers that seem too good to be true. You can read consumer reviews on the official websites of various lenders.

In conclusion, personal loans can be a helpful tool to manage your finances, but it’s important to know the do’s and don’ts before you apply. Remember to shop around for the best rates, borrow only what you need, have a plan for repayment, read the fine print, and use personal loans responsibly. By doing so, you can make the most of your personal loan and avoid unnecessary debt and financial strain on yourself.

Looking to apply for a quick personal loan. IndusInd Bank provides Instant Personal Loans with a complete digital application process, coupled with low interest rates, flexible tenure, and quick disbursements.

Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.