Five tips to make the most of your personal loan

5 MinsOctober 10, 2019

Personal loans are a great way to meet your short-term cash requirements. These could be anything from remodeling your home to emergency medical expenses to making a big electronic purchase or paying off credit card debt.

personal loan

A personal loan is an unsecured loan, which means that you don’t have to put up collateral for the loan. This in itself makes it a very tempting proposition, but there’s more. Today, banks approve personal loans in less than five minutes, subject to certain conditions. You can get a hassle free personal loan from Axis Bank with minimum documentation.

While it does not hurt to take a personal loan when you need quick money, you must be sure that no matter how tempting the offer, you are making the most of your personal loan.

1. EMI should not exceed 10% of income
Make sure your EMI does not exceed 10% of your total income. Today, new-age technology makes it very easy to verify documents and disburse a loan. But keep in mind the old principles of borrowing money, such as borrowing within limits. If your EMIs on personal loans get too high, it will affect other financial goals like your retirement savings or saving for your child’s education. To calculate your EMI for an Axis Bank Personal Loan, use the Personal Loan EMI Calculator.

2. Make regular payments
Personal loans are a great way to inculcate fiscal discipline. They can boost your credit profile if paid regularly and on time. Never miss an EMI on a personal loan. Banks and credit agencies keep records of all loans that have been disbursed, including personal loans. A good repayment raises your credit score, which in turn makes it easier for you to get other types of loans such as a car loan, home loan or education loan.

3. Keep a short tenure
A longer tenure on personal loans indicates that you will end up paying more interest on the loan. Since, a personal loan is generally a smaller amount than an auto loan or a home loan, ensure that it is paid off quickly. This will help improve your credit score faster, and it frees your finances up for other loans.

4. Don’t borrow for frivolous spending or to invest
Today, there is no dearth of investment advice or tips. The lure of a quick buck might entice you to take a personal loan to invest in a financial product. This may however be a mistake as the risks of such a method could far outweigh its gains. Avail a personal loan only for a good reason, such as remodeling/improving your home or in case of an emergency.

5. Insure your personal loans
These days, personal loans also come with insurance. In the event of something untoward happening to the borrower, the insurance kicks in to ensure that the family does not have to bear the cost of paying off the loan. Banks that offer personal loans also offer insurance to protect the loan. It’s a smart idea to avail of insurance when you take a personal loan.

At a glance:

  • Use personal loan for a short-term or urgent requirement
  • Ensure that EMI is within manageable limits
  • Repay regularly to maintain good credit track record
  • Take insurance on the loan as a precaution

[Also Read: Top-up Loans vs. Personal Loans]

Axis Bank provides Personal Loans for amounts ranging from Rs 50,000 to Rs 15 lakh, at competitive Interest Rates, minimum processing and no Foreclosure/Part payment charges. you can apply for a personal loan online, instantly!

Disclaimer: This article has been authored by The Source, a Mumbai-based content creation and curation firm. Axis Bank does not influence views of the author in any way. Axis Bank and The Source 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. Please consult your financial advisor before making any financial decision.