Personal loans can be a great financial tool when you are in need of a bucket of funds to finance your multiple expenses. For example, you can take a personal loan to fund an emergency medical treatment or help consolidate your debt. Moreover, there are no restrictions imposed regarding how you can utilise the money. You are free to use the funds on whatever you want, even if it’s a discretionary expense. So, besides non-discretionary expenses, a personal loan can help you fund your renovation, tours and travels and occasions like marriages.
However, there are several people who are too afraid of applying for a personal loan in India as they fear defaulting. At the same time, there are plenty of people on the other side of the spectrum who avail personal loans, carelessly manage their funds, and then default. So, should you be availing a personal loan the next time you have to incur a significant expense? Yes, you should, provided you can act diligently.
How to Diligently Make Good Use of a Personal Loan
Understand the mechanism of personal loans: First and foremost, make sure you understand what a personal loan is, so familiarise yourself with the terms and conditions involved. Know how they differ from other kinds of loans. Understand terms like interest rates and repayment periods before applying for any loan. In short, the interest rate is the cost of borrowing money. So, a lower interest rate means that you’ll be paying less in the long run.
Research well before choosing your lender: Today, there are several lenders, and it’s important that you choose the best lender for you. So, it would be in your best interest if you compare the lending policies and interest rates offered by the various lenders. Look for lenders imposing low-interest rates or having flexible repayment terms. At the same, in today’s technology-dominated world, considering the lender’s technology infrastructure is also a big deal. If the lender has a solid technology infrastructure, you can easily apply for loans using a personal loan app and have the money credited to your accounts within no time.
Determine your borrowing needs: Taking credit is not at all a bad thing and is, in fact, a good thing, as it helps with the circulation of money in the economy. At the same time, many new-age lending platforms have made it very easy for ordinary citizens to avail personal loans. However, this does not equate that you should heedlessly apply for loans. Only consider applying for a loan if you are certain you will have the means of repaying your debt. So, consider factors like your income, expenses and pending debts. At the same time, don’t overborrow simply because you can. For example, if you are aware that a surplus of Rs. 40 thousand would suffice, there is no need to borrow twice that amount.
Use the money wisely: You know you can use funds you avail through a personal loan in whatever way you see fit. However, consider applying for a loan only if you think the expense is valid. That said, don’t confuse discretionary for non-valid or heedless expenses. Taking a loan for a discretionary expense like purchasing a high-end computer for work qualifies as a valid reason. So, by valid, we mean don’t needlessly apply for loans to satisfy all your wants. So, on the other hand, if you want a high-end PC just to play your favourite video game, avoid taking a loan in that scenario. So, don’t go for a loan just to fund a lifestyle you otherwise wouldn’t be able to afford.
Prioritise repaying your debt: Flexible repayment periods are always a good thing. That said, if your loan offers a flexible repayment scheme, don’t exploit the system. Avoid generating new wants before repaying all your existing debt. In the event you are unable to pay off the loan before the deadline, you can face serious consequences like late fees, damage to your credit score, and even legal action.
Use a loan calculator: Lastly, consider using a loan calculator since it can help you understand the total cost of the loan and determine whether it’s the right financial decision for you. It can also help you compare different loan offers and understand the impact of different interest rates and repayment terms. You can find a loan calculator on most lenders’ websites.
So, you can refer to these tips mentioned in the blog, as they can help you make diligent decisions regarding personal loan. Now, let’s quickly run through the process of availing a personal loan. There was a time when applying for a loan was seen as a tedious hassle. However, the process for availing a loan today has become very simple, thanks to technological advancements. Many innovative platforms like Fibe (formerly EarlySalary), You can visit their websites to get started with the loan application process. You can even apply for a loan using their personal loan app.