Personal loans are useful for a number of reasons. If you’re planning to have your house redone or for a wedding in the near future, you can choose to get a personal loan to achieve any of these dreams.
Since a personal loan is an unsecured loan, it does not need any collateral asset in case of one’s inability to pay. Additionally, there are no restrictions placed on what the loan is used for. It can be used for a personal and non-urgent expense such as a family vacation. It can also be used to expand one’s business for future goals that need to be achieved. No matter what the reason, the amount you receive from a personal loan can be used towards that purpose. Note that one needs to be at least 21 years old to be eligible for a personal loan, and you will need to furnish documents such as ID proof, proof of residence and CIBIL score amongst others.
What to expect with a personal loan:
There are a few aspects to consider while opting for a Personal Loan:
- EMI options: Repaying a personal loan should not cause extra stress and in order to reduce the burden, one can opt for an EMI monthly payment option. To keep track of one’s payments and not default on the loan, the best option is to use a personal loan EMI calculator to see what the monthly payments look like in advance.
- Tenure: A personal loan needs to be repaid between 12 to 60 months
- Personal Loan Interest Rates: Since Personal Loans tend to be for a shorter duration, they may have a higher rate of interest; however, this differs from one lender to another which is why it is always good to compare a number of options before choosing.
Can you apply for multiple personal loans?
Most lenders do not allow individuals to opt for multiple personal loans at a time. If you are eligible for the same, it wouldn’t be something to jump into without considering other options. Other options to consider would be Flexi Personal Loans that accrue interest only on the sum that is used and there is an option to pay one’s interest through EMI along with the principal sum at the end of the tenure.
While you can apply for multiple personal loans from different lenders, this is not advisable, as it is better to take out a higher loan amount from a single vendor. Additionally, lenders may be reluctant to service you with a personal loan if they see that you already have a number of other loans in your name.
What to evaluate while applying for a Personal Loan:
There are some financial goals and future plans one must take into account while applying for a personal loan:
- While personal loans can help achieve certain goals for an individual and allow them not to dip into their savings at once, they do require repayment through monthly obligations with EMI.
- Personal loans have a shorter tenure which means they may have a higher personal loan interest rates.
- While applying for a second loan, there is an additional risk of defaulting hence, additional documentation may be required to satisfy the lender of your ability to repay the same.
- Opting for multiple personal loans may impact your credit score in a negative way which will in turn make it difficult to apply for a loan later in the future when a lender checks your credit report.
- Take into account any existing liabilities as an additional monthly EMI will add to the burden of payments that need to be completed.
- Ensure that your debt to income ratio does not increase. If more than 40% of one’s income is spent on making loan payments, they are considered unqualified for the loan.
Always conduct your own research before finally choosing a personal loan that suits your needs and does not create additional financial burden on you. While you can opt for multiple loans, one shouldn’t do so and it is safer to simply opt for a higher loan amount from your existing vendor.