Five questions to ask before availing of a personal loan

4 Mins Feb 25, 2022

Personal loans are among the most accessible forms of credit available today. Most large electronics stores have counters staffed by a bank or NBFC representatives ready to fund your big-ticket purchases. You can avail of a personal loan even while shopping online on major e-commerce websites. It is often tempting to take advantage of the offer with money so readily available. But here are a few questions you need to ask yourself before taking a personal loan.

5 questions to ask before getting personal loan

What do you need the loan for?

A Personal Loan can be taken for a variety of personal needs which can be funded without any collateral. Aside from need fulfilment it is can be taken by salaried personnel as the first loan thereby helping you build or strengthen your credit score.

What is the loan amount you need?

Figure out the funds you need to meet your objective and only borrow that much. It might be tempting to take a loan of a higher amount, but a personal loan must be paid back with interest. If you default, it adversely affects your credit score, making it difficult for you to borrow in the future.

The general rule of thumb is that your total EMIs (Equated Monthly Instalments) on all your loans put together shouldn’t exceed 40% of your monthly income.

What should the tenure be?

Arriving at a tenure that works for you is a balancing act. A longer term would mean smaller EMIs. However, you would be paying more in interest over the entire tenure of the loan. Figure out a combination of the right-sized EMI and tenure that works for you.

[Also ReadHow Long Does It Take To Get a Personal Loan Approved?]

What are the interest rate and other charges?

You should look to borrow from a financier that offers the best interest rate along with the ease of process. But while you are doing that, also look for other charges like processing fees, late payment charges, and pre-payment penalties, among others.

With a little bit of research, you may discover the right offering per your fitment.

 Where to borrow from?

There are a plethora of banks and NBFCs offering personal loans. How do you choose one? This decision should be based on a combination of a few factors: interest rates and other charges, convenience and ease of applying, and documentation. If you are pre-approved for a loan by a bank that you have an existing relationship with, the entire process of taking out a personal loan is likely to be painless. For example, if you are pre-approved by Axis Bank for a personal loan, you can simply apply on the Axis Bank mobile app or by logging on to net banking, and the loan could be disbursed in minutes.

Axis Bank offers a range of Personal Loans @10.25% p.a. onwards (no collateral required) tailored to meet the needs of most borrowers. You can find out more about personal loan interest rates, personal loan eligibility, and you can use Axis Bank’s personal loan EMI calculator online.

Disclaimer: The Source, a content creation and curation firm, has authored this article. Axis Bank does not influence the 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.