Personal loan: 10 key questions to ask yourself before opting for it

If you are suddenly short of funds and do not wish to borrow from friends then one of the options that you can avail is to raise a personal loan. However, before raising a personal loan, make sure that the interest rate is not exorbitant, time duration is optimum, and the lender is reliable, so on and so forth.

Let us examine the key questions that one should ask oneself before deciding to raise a personal loan. At the outset, you should identify whether your need for personal loan is genuine.

10 questions that you need to ask yourself

1. Do you need the money for sure?

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

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

Another key thing that you need to ask is whether there is another way to raise money i.e., through friends or against a fixed deposit.

3. What is the time duration in which you will repay the money?

At the time of raising the loan, you should have a fair idea of the time period in which you should repay the loan.

4. Which are the banks which you can approach for this loan?

There could be multiple options to raise the loan. For instance, you could raise it from a bank or an NBFC. You could also raise the loan from a small fintech firm that disburses loans via smartphone.

5. Do you have a pre approved insta loan offer?

You may not be aware but you could already have an offer in your net banking. For instance, if you need ₹5 lakh, you may already have an offer to raise ₹7 lakh through your net banking without having to submit any documents.

6. Can you use your credit card instead?

Sometimes you need a personal loan to pay to merchants or vendors or to buy items or merchandise online. In such cases, you could also use your credit card rather than raising a personal loan

7. Can you use a smaller amount instead?

Another question that you need to ask yourself is whether you could settle for a smaller loan amount and make up for the deficit by using your credit card or by using the bank overdraft, and so on.

8. What is the rate of interest that you are willing to pay?

Different lenders offer loans at different rates of interest. You would, therefore, have to decide beforehand what is the ideal rate of interest that you are willing to pay.

9. Is there an option to prepay?

You may raise a loan for a long duration but you must necessarily know if there is an option to prepay the loan, and if yes what is the penalty of prepayment.

10. What is the impact on your credit score?

When you raise a personal loan, it impacts your credit score. In fact, you need to have a good credit score before you decide to take a personal loan. Since a good score is vital to be able to raise loans in future, you must figure out the impact on credit score before opting for it.