5 Important Things to Know Before Taking a Personal Loan – A Guide to Smart Financial Planning
Personal loans have become one of the most popular financial products in today’s time. The reasons are clear – fast processing, collateral-free nature, and the flexibility to use the funds for any essential expenses like medical emergencies, weddings, travel, home renovation, or other personal needs.
However, it is extremely important to keep a few key points in mind while taking a personal loan. With proper planning, not only can you get a better loan deal, but you can also avoid financial stress. Here are 5 essential tips every first-time loan applicant should know:
✅ 1. EMI Calculation: It’s not just about taking the loan, but planning repayment too
Understanding your EMI (Equated Monthly Installment) accurately is the first and most important step before taking a loan. A clear idea of your EMI will help you know how much you’ll pay monthly and how it will affect your budget.
💡 How does an EMI calculator help?
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Enter the loan amount, interest rate, and tenure to estimate your EMI.
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Instantly know how the monthly installment fits into your budget.
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Understand how the total interest increases if you opt for a higher loan amount or longer tenure.
👉 Tools are freely available on websites of banks like HDFC, ICICI, Axis, Bajaj Finserv, etc.
✅ 2. Credit Score: The key to your loan
Your credit score is like a report card of your financial behavior. It reflects how responsibly you’ve managed credit in the past. A score above 750 is usually considered excellent.
🔍 Simple ways to improve your credit score:
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Pay all outstanding bills on time.
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Don’t use your full credit card limit.
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Avoid applying for too many loans or credit cards frequently.
⏱ With time and discipline, your credit score will improve – be patient.
✅ 3. Control Spending and Pay on Time: The formula for a better score
If your CIBIL score is low, don’t panic. You can improve it by changing your financial habits.
📌 Make these changes:
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Avoid unnecessary expenses.
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Clear all outstanding loans and credit card dues immediately.
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Use your credit card only as per need.
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Make timely payments a habit.
🧠 This will not only improve your score but also increase your eligibility for future loans.
✅ 4. Don’t Apply for Loans at Multiple Places: Be Strategic
Each time you apply for a loan, banks make a ‘hard inquiry’ that reflects on your credit report. If you apply at many places simultaneously, it signals that you are ‘credit hungry’ — i.e., in urgent need of funds.
🚫 The consequences:
✔️ It’s better to approach banks or financial institutions where you already have an account or relationship. It increases your chances of faster and easier approval.
✅ 5. Use Auto Debit Facility: A Smart Way to Pay
One of the biggest mistakes in loan repayment is missing EMIs. The Auto Debit facility is the easiest and most effective way to avoid this.
🎯 Benefits of Auto Debit:
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EMIs are deducted automatically on time.
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You avoid late payment charges.
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No negative impact on your credit score.
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No hassle of manual payments every month.
👉 This feature is available with almost all banks and NBFCs. Activate it as soon as your loan starts.
Disclaimer:The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Make Loan Eazy or its affiliates to any licensing or registration requirements. Make Loan Eazy shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.
