Outlook Money
Before you consider getting a personal loan, you must ask yourself and your lender these key questions regarding necessity, cost, affordability and the loan terms.
Be clear about why you need the funds and determine if it is an essential need such as medical emergency, debt consolidation.
Borrow only the minimum amount required to avoid excessive interest rates and future financial strain.
Assess if you can bear the cost of monthly EMIs and if your monthly income can match it with your existing expenses.
A higher credit score improves your chances of better interest rates and loan terms.
Before committing to a personal loan, consider options like using savings or low-interest options like loans against mutual funds.
Understand if the interest rate is going to stay fixed through the tenure of repayment or if it is going to fluctuate with market conditions (variable), as this affects the predictability of your monthly payments.
Some lenders charge a fee if you decide to pay off the loan before the agreed-upon time. Opt for a lender with zero or low prepayment penalties.
Know the exact timing of the streamlining process and by when you can get the funds.
Understand the implications of late fee payments, penalty interest and the lender's policies regarding loan refinancing.
Personal loans are generally unsecured, meaning without any collateral, but if collateral is required, understand what kinds of assets are at risk.