5 smart tips to follow before taking a personal loan

If you have a pressing need for cash, then a personal loan is one of the options available to you. Their easy availability is one of the biggest draws. While it is certainly a good way for handy cash, they are expensive and you are best advised to look before you leap into them.

So, today we are going of share some smart tips about personal loans, which would help make this loan product work in your favour instead of creating a problem.

#Tip 1: Do a smart all inclusive comparison
When you plan to take a personal loan, you would observe that interest rates vary from bank to bank. The best way to get an optimal loan would be not just to compare the rate of interest or EMI, but also take into account the processing charges, documentation charges and pre-closure charges.

# Tip 2: Examine other options
Secured loans such as loan against gold or other securities usually come at a cheaper rate of interest. Hence, if you do have security that you can use, do examine that option before swinging in for a high interest personal loan.

#Tip 3: Do not over-shop for the loan
When you apply for a loan you leave a “footprint” on your credit record which lenders check before approving a loan. Too many loan applications bring down your credit score.
As a result lenders will see you as more of a credit risk, so your latest loan application is less likely to be approved or the rate of interest will be higher.

#Tip 4: Read the loan document
Before signing on for a personal loan, read the document properly. Ensure all the terms and conditions are filled in completely and match on those that were agreed upon while taking the loan. Very often, personal loans are marketed by agents who are more interested in meeting sales targets than giving accurate updated information to the customer. So beware!

#Tip 5: Use the money productively
Use the home personal loan for productive purposes. Personal loans are easily available, but do remember that you have to repay them and they do come with a high interest rate. It is wise to take a loan if you really need it or if it is being used to generate income that will help you repay the loan and interest.


About the author: Rajiv Raj is the director and co-founder ofwww.creditvidya.com.