8 Questions You Should Ask Before You Apply for Personal Loan Online

Interest is not the only thing you pay for loans. There are hidden costs. There is your effort to submit the paperwork and get approval. It’s more sweat and money than you actually count. So before you apply for personal loan online, ask yourself some questions. Spend some time to debate each one of them.

1. How much should I borrow?

There is always a maximum amount restriction on personal loan. It’s the amount you can borrow as a personal loan. It depends on your financial standing. Arrive at a concrete figure of loan you need. Your chance of getting the loan approved is dependent on it. Start with how much money you want. Don’t be tempted to have extra cash in hand just because it’s available. If you need to change the living room furniture with your personal loan, research on what you want to buy, the cost of it and nothing more. When you borrow 50 thousand, you return more. Remember that. Be very calculating while arriving at the figure.

2. What do I need the loan for?

Personal loans are often taken to finance an emergency, pay off debt or for home improvements. The lender asks for a reason. However, the decision on your application is not dependent on it. Still, be clear as to why you need the loan? Arriving at the reason would help you debate on whether you truly need it or not. I’ve seen people taking a personal loan because it’s easily available. It’s a loan, and you have to pay more money than you’ve borrowed. Be clear with its objective.

3. How much can I afford to repay?

The tenure of repayment for a personal loan is less than that for some other type of loans and the EMIs are higher. Calculate your monthly expenses, subtract them from your monthly income – this residual is the maximum amount of money you can afford to repay as the loan installment. Remember to factor in emergencies or seasonal expenses that you may have to take care of. Never think of using all that residual income to pay off the EMIs. Best practice would be to keep the EMI figure between 60-70% of your residual income. Always leave room for the unexpected.

4. What are the extra costs attached to it?

Think beyond interest rate. Interest rate is the main price you pay when you take a loan. But there are other costs attached to the loan. There are processing fees, administrative fees, penalty on early repayment of the loan etc. Understand the total cost of the loan before arriving at a decision to borrow. Plus, there is always the opportunity cost. What would you have done in that extra money you are paying as interest? Is your loan worth all of it? Think.

5. How long will you be paying the loan back?

The tenure of repayment is a very important factor to consider. How long will you be paying the loan? Because you can’t take an additional loan until you pay this one off. Personal loan which offers zero percent interest rate often comes with a defined repayment tenure. It’s generally of lower duration than the other loans. Ask yourself how many years you will be paying this loan? Do you see any source of income which would help you to pay it off early? Generally, the longer the tenure, the greater the rate of interest, i.e., the cost. Answer all these questions to arrive at a calculated decision.

6. What kind of personal loan do I need?

To know and understand your exact need is the first step to take a decision you won’t regret. There are many types of personal loans in India – wedding loan, holiday loan, loan for renovation, festival loan and computer loan. Narrowing down the type of loan would help in getting the paperwork sorted. It would also help in understanding the legitimacy of your needs and the amount of loan you need to take. This may sound repetitive in nature as we have already talked about ‘what do you need the loan for’ earlier. This is different as it would help you to narrow down the bank or App which is offering the most competitive interest rate and conditions. Think from that perspective. Compare and shop.

7. Where should I get the loan from?

There are banks, credit card companies or your own employer who would extend you a personal loan. Generally, the best terms of the loan are offered by your employer. Pick him over other sources. In case you are going to a credit card company, make sure to review the hidden costs. Shop around to pick a bank or App. Negotiate. Some may waive off the processing fees to get a customer. Don’t ignore the reviews online. Also, you can apply for personal loan online with Money View. Download the app to know more.

8. Are there any other alternatives than to take the loan?

Give it a second, third and fourth thought – Is the loan absolutely necessary? Think of ‘what if’ scenarios. What if you don’t take the loan – Is there any other alternative to finance? Think hard. What if there is another emergency, would you have room to finance it? Ask yourself these questions to know that it’s absolutely necessary to get a loan.

Ask all of these questions or debate them with your family before applying for a loan.  It would help you to arrive at a calculated decision. Are there more questions one should ask? What has your experience been before applying for a personal loan? Please share in the comments below.