Should Personal Loans Be Taken For A Home Renovation?

by Arjit Chalmela Finance Student

Before making availing one, it is essential to understand the models, terms, and processes of a personal loan. Though in a short period it's instant money transferred to your account, on the one hand, and without any collateral; on the other hand, these loans typically have a higher interest rate than banks. But again, personal loans don't let you go through lengthy background checks and usually endorse a single-step KYC check.

Fast, safe, and trouble-free personal loans allow you to do whatever you want and when you want to. That being said, when availing of a personal loan, we also need to be aware of a few things. Indeed, any loan is a debt that comes with its share of terms, conditions, penalties, taxes, duration of repayment, etc. Following are some suggestions that you should bear in mind when you take a personal loan.

The loan amount

Keep in mind your resources and borrow as much as you need, no matter how much you are eligible for. The smaller the amount, the quicker you can pay off. If necessary, do not borrow more than 50 per cent of your income as a thumb rule.

Rate of interest

Different lenders offer different interest rates on their loans, so consider the options carefully, and choose wisely, as it is the interest rate that will have a direct effect on both the instalment amount and the repayment duration. EMI calculator will help you calculate the interest rates.

Loan term

Reimbursement duration or the time you take to pay off your debt should be considered carefully. In a perfect world, one would plan to pay off a loan as soon as possible and therefore aim for the shortest period, but that also means higher EMIs and shelling out of your pocket more money. So make certain you do not pay a high-interest amount, it is best to match the EMI rate with the repayment period.

EMI payment

The principal sum, interest, and repayment period together form the EMI, and when you repay the loan, it will be a significant amount for a prospective borrower. Take a look at your monthly incomes and expenses to decide how much EMIs you can pay comfortably and then select the loan amount. A personal loan calculator will help you with calculating EMI payment and the loan term.