What to check before taking a Personal Loan? Essential checklist for easy borrowing

A personal loan is a flexible financial tool that helps individuals cover major expenses like education, weddings, vacations, home renovations, medical bills, or gadget purchases. It serves as a cost-effective alternative to credit cards and allows borrowers to repay the amount in monthly instalments.

Before applying, it is essential to consider factors like credit score, interest rates and extra charges. This helps avoid common mistakes such as choosing the wrong lender, unsuitable loan tenure, or borrowing more than needed.

Here are several factors one should consider before taking a personal loan from a financial institution:

Compare and examine market interest rates

Comparing interest rates from different lenders ensures you get the lowest one. Platforms like Moneycontrol, BankBazaar and Paisabazaar make it easier to compare the rates provided by various financial institutions.

This makes it easier for customers to repay the loan by allowing them to choose the personal loan financing option with the lowest interest rate and the interest type that works best for them.

You can compare multiple personal loan offers from eight lenders on the Moneycontrol app and website. The interest rates start at as low as 10.5% per annum. Moneycontrol allows borrowing up to Rs 50 lakhs in a completely digital process.

Loan amount, tenure and repayment

Payment, tenure, and loan amount directly impact the personal loan EMI. Choosing the right loan amount, flexible tenure and manageable EMIs helps borrowers find a loan that suits their financial needs.

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Maintain a healthy credit history

A customer's creditworthiness is determined by their credit repayment history and is represented by their credit score, also referred to as your CIBIL score. The desired CIBIL score is 700 or above.

One can maintain a healthy credit score by repaying their dues on time. The loan application might get denied, or one may be charged a higher interest rate if the credit score is lower, which indicates poor debt management.

Evaluate every expense

Before applying for a loan, borrowers should consider all associated costs, including processing, prepayment and late payment fees, to get a clear picture of the total expense. Understanding these charges helps in better financial planning and assessing the loan’s affordability.

Select the correct loan amount

The amount can be determined based on the costs and prices related to the borrower's needs. A Flexi personal loan is a good choice if their financial needs are unpredictable.

Check ability to repay the personal loan

Customers should review the repayment plan carefully and ensure they have sufficient income to repay the loan on time. Using tools like a personal loan EMI calculator helps estimate monthly instalments and ensures affordability without compromising other financial commitments.

Watch out for deceptive offers and services

Offers that look too good to be true should be avoided while looking for a personal loan. Always read the fine print to prevent unforeseen expenses and make sure the loan terms are clear and controllable. Certain lenders may promote low starting rates that may eventually increase or contain unstated fees.

Some suppliers also hide fees and charges in documentation. Choose an honest and forthright lender for the best personal loan experience.

Check the lender’s credibility and customer service

Before taking a personal loan, it’s crucial to research the lender’s reputation and the quality of customer service they provide. Reading customer reviews, complaint records and ratings on platforms like RBI’s website, Trustpilot, or Google Reviews can help assess the lender’s reliability.

When considering a personal loan, it’s important to evaluate factors like interest rates, loan tenure, repayment capability, hidden fees and lender reliability. Comparing offers, maintaining a good credit score and understanding loan terms will help ensure you make the best decision for your financial situation.

With Moneycontrol’s online lending platform, you can access personal loan options up to Rs 50 lakhs from eight lenders, with interest rates starting at 10.5% per annum. The entire process is 100% paperless.