What things should you consider before taking a personal loan?

Ajitsamal Afinoz
4 min readNov 2, 2020


Believe it or not, in an emergency situation, a personal loan could help you out. Even if there is no emergency, but you need funds, the instant loan is one of the ways to get ready cash. Not only salaried individuals but also self-employed professionals, travelers, students, or traders could benefit from the personal loan. A lender such as SBI personal loan or ICICI personal loan has made it big due to offering it to a large section of people.

However, before you take it, there are certain things you have to know. In fact, doing research would be helpful. You could start by reading about various lenders and their offers. Here we wanted to tell you about few things you should consider before you take a personal loan.

What is your financial situation?

The first thing you have to do is look at your financial situation. You must have heard the saying” never bite more than what you can chew.” So, choose a personal loan based on your ability to repaying. Otherwise, if you take a loan beyond the ability to repay, the consequences will be severe. First, it will affect your CIBIL Score. Second there will be multiple extra charges which you will have to repay,

For example, If you want to take an SBI personal loan, check out the SBI personal loan interest rate, the processing charge, the late payment charge, and the maximum loan amount they offer. Just because it is offering you Rs 10 lakh, you do not have to take the full amount while your requirement is Rs 7 lakh.

Is there an alternate option?

There is no denying the fact that a personal loan has a high rate of interest. Very few lenders such as SBI personal loan,Bajaj Finserv personal Personal loan, or Kotak Mahindra bank personal loan offer interest below 12%. Otherwise, the majority of the lender’s interest rate goes up to 24% to 36%.

It all depends upon the borrower’s credit score and negotiation skills. Then if you miss a payment, there will be late payment charges. So, these high risks tell us, we should consider the alternate option to get money before we finally agree to take an instant personal loan.

If your family member or one of your friends could help you out, the money would be an interest free, and there will be mental peace.

The enigma of CIBIL score

If you do not know about CIBIL Score, you will certainly see it as a great unsolved puzzle. However, it is a simple thing once you understand the basic. A CIBIL Score describes the borrower’s financial condition. A high score means good condition, while a low score means bad condition.

A CIBIL score is essential to decide the personal loan interest rate. It become easy to take the loan. So, always check what Credit score a lender is demanding.

For example, SBI personal loan requires a minimum of 750 CIBIL scores. If your score is above it, you are likely to a lower interest rate. But as the Score goes down, the interest will go up. By the way, the score ranges from 300 ( Lowest) to 900 ( Highest).

The negotiation skills

As we said, having a good credit score means you will have a low-interest rate. However, in the end, it is your negotiation skills that will get you the loan. Always make an inquiry into a few lenders offering the loan. The lenders could compete among them to offer you the best deal. But it will happen only when they see you as a valued customer who will repay the loan on time.

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Which lender you will choose

An essential thing to do when you are looking for a personal loan. Which lender you are going to choose. Sometimes, you could choose your own bank to get the loan. But when you have to choose someone, it gets difficult. You should look for a lender offering any offer, have a lower interest rate, and offer balance transfer or top-up facility.

Lastly, speed also matters also when availing of the loan. Some lenders are famous for offering the loan within the same day of applying, while some at least 1 week to disburse the loan amount.

Here are a list of few lenders with the interest and loan amount and processing fee.

Do you read the loan agreement paper?

Always, no matter who the lender is, Always read the loan agreement papers? Do not commit to it unless you are sure what you will get into. There should be no surprises for the future. It will take from a few minutes to hours, but do read the paper before you sign it.

Especially pay attention to the penalties section. A lot of times, the lender may not tell you one or two things, which will be mentioned in the agreement. Later, they may come as a surprise, which you do not wont be knowing about . So, thumb ruleis to , read the personal loan agreement paper. If you do not like the terms, move on to the next lender.

Benefits of a personal loan

Well, now you know what things you should consider before taking a personal loan, it is equally essential to know the benefits of an instant loan. The first advantage is that you do not have to offer collateral in order to apply for the loan.

Second Is, it requires minimal documentation comparing to other loans, making the disbursal process very fast. The process is transparent, and if you choose the right lender, there will be no hidden charges.


Knowing the risks always pay off. And a personal loan is the right kind of risk if you could pull it off. Make sure to choose an online lender in case you want to apply from sitting in your home. Get the best personal loan to help yourself from coming out of a financial emergency.

Originally published at https://dailygram.com.



Ajitsamal Afinoz

I am a diligent and motivated self-worker with 3+ years of experience working in credit review and loan processing within the financial tech industry.