4 Essential Things To Keep In Mind Before Applying For A Personal Loan

Summary: If you require money, taking a loan is not bad. However, the problem comes when you borrow money for your desires and not needs.

If you need money, you can come across an ocean of choices. From banks, and personal financial institutions to lending apps that lend small sums between INR 2K and 10K, many Indians are borrowing money to fulfill their business and personal needs. However, these lending apps are proving harmful and costing many their money, peace, and even their lives.

“The number of suicide cases has been on the rise since the pandemic and approximately 25,200 of those are attributed to unemployment, job loss, and being in debt”, according to data from National Crime Records Bureau.

In 2021, at least six people committed suicide in Hyderabad alone due to harassment by the recovery agents of these apps. These apps lure those who are in dire need of funds and exploit their unmet need for credit by offering no-strings-attached credit. However, they come with a high rate of interest and tricky terms and conditions to which borrowers have no recourse.

Along with that, these loan apps get access to all information from the customer’s phones after which is later used by the company to perpetrate some other financial crime.

Many business coaching programs will help you to manage your finances and get rid of your debt quickly. For those who are looking for a personal loan for the first time, it is critical to understand the nature of these loans.

Here are 5 essential tips you should consider before applying for an immediate personal loan online:

1. Pick a Loan with Lower Interest Rate

Personal loans usually come with higher interest rates and often range from 11% to 20%. Thus, even a small drop in the interest rate can make a huge difference to your overall loan costs. If you opt for a low monthly payment over a long repayment term out of convenience or for any other reason, it will cost you more as it comes with high-interest rates. Small monthly payments might seem very appealing, but it ultimately leads you to pay more for the loan over its lifetime.

2. Assess the Need for a Loan

While availing of a loan is not a bad thing, it is a financial responsibility that can extend over some time. A bad loan will lead to a financial liability that can give you sleepless nights. Hence, it is essential to weigh your motivation behind the loan and ensure that it is necessary. If the purpose of the loan is to only buy a luxury car, it might not be a wise decision.

Also, it is a high-risk move if the idea behind taking a loan is to invest in other financial products/schemes hoping to make profits. Such borrowing and reinvestment schemes are also subject to market risks and there is never a guarantee of lucrative returns.

3. Always Take a loan from the Credible Financial Institution

Apart from traditional banks, there are other financial institutions as well that are approved by the market regulator Reserve Bank of India. Digital lenders are comparatively quicker in verifying and processing loan requests, disbursement often happens faster.

It is advantageous to have multiple options to choose from as it further allows a borrower to evaluate and compare interest rates, processing time as well as other important parameters before deciding on their loan.

4. Consider Insuring Your Loan

One thing that pandemic has taught us is that life is unpredictable. Before taking a loan, ensure that your family does not have to bear the consequences of the worst-case scenario. Hence, it is important to get your loan insured. Loan insurance also works like any other insurance plan. You can pay its premium every month or as a lump sum amount.

Personal loans can be beneficial if you have planned your finances well. When used wisely, it can help you to bridge the gap in your finances without putting your assets at stake. But, it is important to ensure that you are taking a loan from a genuine source and that you pay your loan back promptly. And most importantly, remember to use the loan only for its intended purpose. You can also learn debt management through our business coaching program. To know more, visit: https://www.badabusiness.com/BCP-Event/?pp_code=BHBB000078&ref_code=SM