Personal loans are considered a lucrative option by many. These types of loans do not require collateral. This flexibility makes personal loans an attractive option for fulfilling immediate financial needs. Sometimes, situations arise when unexpected expenses leave you in need of large sum of money. You can benefit from personal loans in these circumstances. However, borrowers should proceed with caution when considering a personal loan. Before making any final decision, you must assess your finances to repay the loan to reduce the potential risk. 

Interest rates

Study the interest rates for personal loans. Interest rates for personal loans typically vary between 11 percent and 24 percent. These rates can vary depending on who you are taking a loan from. Therefore, it is advisable to research and compare the interest rates offered by several banks before deciding on a loan. By performing proper research, you can get good deals while securing a loan with lower interest instalments. 

Credit score

Before applying for a personal loan, check your credit score. Not conducting thorough research may lead to losses. A lot of vendors typically ask for a minimum monthly income of Rs 15,000. It is important that your income meets this requirement before applying. 

How much to borrow?

Several banks offer personal loans, so it is essential to have a clear understanding of interest rates and EMI amounts. Borrow an amount that you can easily pay back. A stable income would ensure better management of EMIs.

Personal loans typically have a tenure of 5 years. Taking into consideration your income, choose a shorter loan period to reduce the total interest paid. Even if it means slightly higher EMIs, the overall cost of borrowing would decrease.

Paying EMIs on time

Personal loans have a higher interest rate. Always make sure that you pay your instalment on time. Failure to do so can adversely affect your CIBIL score. Timely paid EMIs help you maintain financial wealth and establish a good rapport with the bank, and this can help you secure loans in the future as well.