Personal loan: 10 key questions to ask yourself before taking one

If you suddenly lack funds and don’t want to borrow money from friends, then one of the options you can use is to get a personal loan. However, before taking out a personal loan, make sure that the interest rate is not exorbitant, the length of time is optimal, and the lender is reliable, and so on and so forth.

Let’s look at the key questions to ask yourself before deciding to take out a personal loan. First, you should determine whether your need for a personal loan is genuine.

10 questions you need to ask yourself

1. Do you really need money?

Typically, people take out a loan for a variety of purposes, such as a wedding, home renovation, buying a luxury item, and even for a vacation abroad, etc. So, the first thing you need to ask yourself is whether you really need a loan.

2. Do you have an alternative way to raise money?

Another key question you need to ask is whether there is another way to raise the money, such as through friends or a fixed deposit.

3. When will you return the money?

At the time of taking out the loan, you should have a clear idea of ​​the time period within which you have to repay the loan.

4. Which banks can you apply for this loan?

There may be several options for obtaining a loan. For example, you can get it from a bank or NBFC. You can also get a loan from a small fintech firm that issues loans via smartphone.

5. Do you have a pre-approved Insta loan offer?

You may not know, but you may already have an offer in your online banking. For example, if you need ₹5 lakhs, you may already have an offer to raise ₹7 lakhs through net banking without the need to provide any documents.

6. Can you use your credit card instead?

Sometimes you need a personal loan to pay merchants or sellers or to buy goods or merchandise online. In such cases, you can also use your credit card instead of taking out a personal loan.

7. Can you use a smaller amount instead?

Another question you need to ask yourself is whether you can agree to a lower loan amount and make up the shortfall by using your credit card or using a bank overdraft and so on.

8. What interest rate are you willing to pay?

Different lenders offer loans at different interest rates. Therefore, you will have to decide in advance what the ideal interest rate you are willing to pay is.

9. Is it possible to prepay?

You can get a loan for a long term, but you should definitely know whether there is an option to repay the loan early, and if so, what the penalty for early repayment is.

10. How will this affect your credit score?

When you take out a personal loan, it affects your credit score. In fact, you need to have a good credit score before you decide to take out a personal loan. Since a good score is vital to your ability to obtain loans in the future, you should find out how it will affect your credit score before choosing one.