Personal Loans

Here’s What You Should Consider Before Taking a Personal Loan This New Year

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With Christmas knocking at our doors, we are all pepped up to celebrate the last major festivity of the year and ring-in the new year with loads of excitement. From buying fancy presents, participating in corporate events, and heading for exotic tours- Christmas brings a little something for all of us. But amid this festive cheer, most of us get carried away with the holiday expenses. The result: our bills add up and we’re left with a hefty outstanding payment in the beginning of the following year. This issue, however, can be easily resolved with proper financial planning. Yes, you can now zap your bills and consolidate them with a personal loan. Alternatively, you can also take this loan to meet multiple expenses. Since the interest rate is much lower than credit cards and the tenure ranges from 1 to 5 years, your monthly instalments will be small and manageable. But before taking the plunge, let’s take a closer look at the factors to consider before applying for a personal loan.  

Compare Interest Rates

While interest rate isn’t the only factor to be considered, it is important to compare it to settle with the most competitive deal. Different lending institutions will offer different interest rates depending on their policies, your credit report, and other miscellaneous factors. Make sure you have a complete understanding of these rates before finally settling with a lender. If you are unsure about the rates and policies, confirm it with the representatives of the concerned lending agencies. Finally, when you have a list of interest rates charged by multiple lenders, compare them and settle with the lowest.  

Understand Your Needs

Very often, people consider taking a holiday loan for something they want but don’t necessarily need. If your expense can be pushed further and doesn’t require immediate attention, it’ll qualify as a want. Do not give in to your ‘wants’ even if it’s the holiday season. Additionally, avoid taking more money than you ‘actually’ need for the expenses. If you are taking the loan to fund your vacation and your overall expenses come to Rs 3 lakh, do not take a loan worth Rs 5 lakh just because you qualify for it. While this may not seem much in the beginning, the cost will soon weigh you down when the time comes to pay it off. 

Evaluate the Extra Costs

An interest rate isn’t just the only cost that comes with your personal loan. Instead, it comes with a range of other charges including (but not limited to) processing fee, late payment fee, and prepayment fee. Since the costs might differ depending on your lender, check it clearly, before signing up for the loan. Also avoid applying with a lender if they do not have any provision to pre-close your loan.

Bottom Line

Remember, a little financial planning goes a long way in helping you save on interest and other unnecessary charges. So, before taking that personal loan this Christmas, check our factors and consider following them. 

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