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4 questions to ask yourself before taking a personal loan

4 questions to ask yourself before taking a personal loan

4 questions to ask yourself before taking a personal loan
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By Anshul  Oct 8, 2020 9:28:00 AM IST (Updated)

A personal loan is an unsecured loan taken by individuals from a bank or a non-banking financial company (NBFC).

A personal loan is an unsecured loan taken by individuals from a bank or a non-banking financial company (NBFC). While it can be used for several purposes, customers need to ask themselves a few questions before applying for it.

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Here are some of them:
What is the need for a loan?
This is one of the first questions borrowers need to ask themselves. They should check if it is required for financing an upcoming occasion at house or vacation or for paying credit card debts.
They should ask themselves several times – is it possible to use savings or delay the purchase? If not, they should diligently make the selection so as to limit default risks.
Are you eligible for a loan?
Normally, lenders see the credit score, income, affordability, and depending on the value of the loan, any collateral that a borrower may have. Borrowers should, hence, find eligibility criteria on the websites of lending companies and then proceed.
Can you afford the repayment?
According to Charlie Lee, founder, and chief executive officer, True Balance, the customers should take a loan that they can easily repay. The money borrowed should not only satisfy the needs but also be something that the borrower is able to pay. So, they must analyse their financial condition and check the EMI calculators available on the website of the lending companies.
This will give them a fair idea of monthly repayment based on the loan amount, duration, and interest rate.
What is the tenure of a loan?
When applying for personal loans, customers should also check the tenure of the loan.
According to Bajaj Finserv, personal loans can be taken for as little as 6 months or as long as 5 years. This means tenure and interest together dictates what the monthly repayment amount will be.
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