Personal Loan Rules: Factors to Consider Before Loan Procurement

In recent years, personal loans have become an important means for people to meet their needs. It is easier for salaried personnel to secure the loan. This is because they have a consistent income, which increases their credibility to repay the loan. There are various things that must be analysed and calculated before applying for a loan. The evaluation of these factors will not only allow the borrower to obtain an adequate amount of loan and that too at a lower cost.  Several factors must be mused over before procuring a loan. Here are some important personal loan rules applicants must know:

1. Since personal loans are offered at comparatively higher rates than secured loans, it is advisable to calculate the precise amount required. It not only prevents over-expenditure due to additional availability of funds but also helps in reducing the Equated Monthly Instalment (EMI) amount.Several banks and non-banking financial companies (NBFCs) offer personal loans, thereby increasing competition. This allows the borrower to negotiate with the lenders and procure a loan at the lowest possible interest rate. Therefore, one must undertake a thorough comparison between the interest rates at which loans are being offered by various lenders.There are several charges, which have to be paid by the borrower when taking a personal loan or foreclosing it. It is vital to have complete knowledge of all the additional costs involved, like processing fees, credit appraisal charges, stamp duty, foreclosure charges, lock-in period costs, etc.Many lenders try to lure borrowers by playing smart tricks, like offering loans at 0% interest rate. The borrowers must carefully read terms and conditions to understand the hidden charges or higher fees being levied on them.The time required to disburse the loanand the simplicity of the process in obtaining a loan are also important factors when it comes to personal loan rules.One must consider whether he/she has the financial capability to adjust the EMI amount. It is, therefore, necessary to use an EMI calculator and decide beforehand as to how much EMI can be surely paid to avoid discrepancies in payments.The borrower must ensure that he/she maintains the credit score through the payment of credit cards and existing EMIs before the due date. Since personal loans are riskier for the lending institution, they take the decision regarding loan disbursement based on good credit history and stable income of the borrower.Failure to pay only one EMI on time will result in the borrower incurring late-payment charges, along with permanently damaging their credit score .

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.