Personal loan has become a way to go credit instrument in the twenty-first century. A steady job and a good paycheque become your gateway to personal loans. The booming lending business in India is an indicator of the popularity of this product, especially among salaried professionals.

What are the reasons for the popularity of personal loans?

Personal loans are unsecured loans, in other words they are collateral-free They are convenient and quick to process. The entire process of applying and getting a loan is completed within 24-36 hours.

What are the commandments to follow?

Commandment 1: Thou shalt select thy lender carefully

Commandment 2: Thou shalt use  a personal loan EMI calculator

Commandment 3: Thou shalt calculate the applicable interest rate

Commandment 4: Thou shalt not fall for gimmicks like 0% interest rates

Commandment 5: Thou shalt not fall for Advance EMIs 

Commandment 6: Thou shalt check for all charges

Commandment 7: Thou shalt confirm the foreclosure clause

Commandment 8: Thou shalt not apply with multiple lenders

Commandment 9: Thou shalt provide accurate information

Commandment 10: Thou shalt maintain a good credit score

Commandment 1: Thou shalt select thy lender carefully

Do not pick the first offer available. Even if your regular bank offers you a good rate, you may be better off scouring the market for the best rates available. A loan aggregator site would be able to provide you with this information. Moreover, there are seasonal and festive offers always doing the rounds. If you can afford to wait a bit, you may get a better deal. A little patience and a lot of research can yield excellent results.

Commandment 2: Thou shalt use a personal loan EMI calculator

Before you decide to apply for a personal loan, you should use a personal loan EMI calculator. Play around with combinations of the amount of loan, the interest rate at the lender you have identified and the tenure to see the optimal EMI for you. The EMI should be a comfortable amount to pay that will not make your monthly budget go haywire. Always pick a longer tenure in the beginning to keep the EMIs low. In case you come into some extra money, you can always choose to prepay after six months.

Commandment 3: Thou shalt calculate the real interest rates

Learn to calculate the actual interest rate. Do not go by the flat rate quoted as it could be misleading. When you are repaying a loan in EMIs, the interest should be calculated on a reducing balance basis. Ensure that you do not fall for financial jugglery and know what you are actually going to pay in advance. Choose between flat or reducing interest rate depending on what is affordable for you.

Commandment 4: Thou shalt not fall for gimmicks like 0% interest rates

The 0% interest offered by lenders for consumer durables is a big rip off. The lenders make their money by charging a hefty processing fee upfront that more than covers the interest you would be paying otherwise. It is then packaged as a 0% interest EMI to you which you are more than happy to pay. 

Commandment 5: Thou shalt not fall for Advance EMIs 

The practice of taking a couple of EMIs in advance is also a sham. Once you have paid the advance EMIs your loan amount drops by that amount and the interest rate goes up accordingly. Most borrowers do not realise this catch till it is too late. It would be prudent of you to figure this out and avoid lenders who ask you for advance EMIs.

Commandment 6: Thou shalt check for all charges

Whenever you enter into a personal loan agreement, do ensure that you check for all charges so that nothing is hidden or comes as a surprise at a later stage. Every lender would be charging about 2% of the loan amount as a processing fee. Every charge that you pay adds to the cost of the loan and should be taken into account before signing the agreement.

Commandment 7: Thou shalt confirm the foreclosure clause

Normally, it is expected that a personal loan will run for its tenure. Any foreclosure is subject to prepayment penalty charges. Some lenders, like LoanTap, offer a clause that allows you to prepay the entire loan after a period of six months without any penalty. It is important to check the foreclosure clause before signing the agreement.

Commandment 8: Thou shalt not apply to multiple lenders

When you apply for a personal loan, the lender sends your documents for a credit score assessment. If too many lenders send your details across at the same time, it would be obvious that you are desperate for credit and this would not help your cause. Lenders may reject your application for they may fear that you would get your loan approved from another lender. Do your research and go with one lender at a time.

Commandment 9: Thou shalt provide accurate information

When you apply for a personal loan, you will need to fill out an online application. Make sure you fill in the details accurately so that the application has a better chance of getting approved. Providing incorrect or insufficient information may result in a rejection of your application.

Commandment 10: Thou shalt maintain a good credit score

A credit score is a numerical summary of your credit history. It is a number between 300-900. A score closer to 900 is considered excellent. Usually, a score between 750-900 is considered ideal and most of such applications get approved without any hassle. It is important to pay your EMIs on time and not to default to ensure a good credit score.

It is important to follow the above commandments while applying for a personal loan. It is in your best interest to be prudent and explore all available options before jumping into a personal loan agreement.

That said, obtaining a personal loan from LoanTap is like a walk in the park. If you are an Indian citizen or resident over the age of twenty-one and earning a monthly income of over Rs 30,000, you are eligible to apply for a personal loan.

All you need to do is to visit our website, fill out the application and upload the following documents –

  • PAN Card
  • Aadhaar card
  • Salary Slips of last three months
  • Bank Statement of Salary Account for last six months

The friendly folks at LoanTap will evaluate your application and if found satisfactory the loan will be disbursed within 24-36 hours. LoanTap offers customised personal loans for all your needs from Rs 50,000- Rs 10,00,000 for a period of six months to sixty months at interest rates starting from 18% per annum. You are free to foreclose the loan after six months without any penalty. You can choose from a slew of repayment options according to your convenience. Remember, for all your personal loan needs, we are just a LoanTap away!

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Satyam Kumar is banking industry veteran with enriched experience of more than 20 years. Apart from founding LoanTap and FinTech Association of Consumer Empowerment, he is an avid traveler and holds keen interest in Blogging. He has amassed profound knowledge in FinTech trends, banking, consumer trends, food and mythology which he loves sharing with others.
Satyam kumarSatyam KumarCEO & Co-Founder, LoanTap asset 8 asset 9
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