A personal loan can help pay for a wedding, an emergency, a home renovation, or even a dream holiday. You don’t need to pledge anything, but it’s important to make wise choices. Here are 9 key points to keep in mind before taking one, so your loan stays a help, not a hassle.
1. Borrow Only When You Must
A personal loan is a long-term commitment with monthly EMIs. Ask yourself: Can you manage the EMIs easily? If not, your budget and credit score can suffer down the line.
2. Know the Total Loan Cost
Interest rate matters, but so do extra fees. Always check:
- Interest rate
- Processing fee
- Hidden costs (see next point)
- Prepayment and late-payment charges
Compare lenders to know exactly what you’ll pay.
3. Watch Out for Hidden Charges
Banks often add extra costs. Watch for:
- Processing fee: 1–3% of loan (e.g. Rs.5 lakh loan may cost Rs.10,000)
- Prepayment penalty: 2–5% of the outstanding loan
- Late payment fee: Rs.500–1,500 per missed EMI or 2–3% of overdue amount
- GST (18%) on processing fees and other charges
- Bounce charges: Rs.300–750 per failed auto-debit
These costs can add up, so add them in when comparing loans.
4. Choose the Lowest Interest Rate
Personal loan rates vary from around 10.5% to 24%+:
- HDFC, ICICI, Kotak: ~10.5–17%
- Axis, SBI, PNB: ~10.5–14.5%
Even a small difference drastically affects the total cost.
5. Check Eligibility in Advance
Before applying, ensure your:
- Age: Usually 21–60 years
- Income: Stable and sufficient
- Credit Score: Ideally 650+ or 750+ for best rates
Stronger profiles get better interest rates and lower fees.
6. Keep a High Credit Score
A score of 750+ earns top loan offers. Lower scores may lead to high interest or rejection. Always check and, if needed, improve your score before borrowing.
7. Know About Prepayment Options
If you plan to repay early, ask:
- Can you prepay part or full loan?
- Are there penalties?
Some lenders waive prepayment fees after a time. Others charge up to 5%.
8. Always Pay EMI on Time
Paying late can:
- Attract penalties
- Damage your credit score
- Increase total loan cost
Set reminders or auto-debit to stay on track.
9. Opt for a Shorter Loan Tenure
Longer tenures reduce EMI amounts but increase total interest. If you can afford it, choose a shorter tenure to save money.
Bonus Tip: Compare Lenders & Negotiate
- Compare at least 3 lenders
- Apply near the month-end to get competitive offers
- Ask about waiving or reducing processing fees
- Consider shifting loans to lower-rate lenders later
How Moneycontrol Helps You Apply Easily
The Moneycontrol app offers:
- Instant personal loans up to Rs.50 lakh
- 100% digital process
- Interest from 10.5% to around 12% per annum
- No hidden fees
📋 Complete Loan Checklist
| Step | Why It Matters |
| Only borrow when necessary | Avoid burdening your monthly budget |
| Compare total cost | Understand interest + hidden fees |
| Check hidden charges | Access the best rates and deals |
| Choose a shorter tenure | Saves you the most overall |
| Verify eligibility | Saves time and boosts approval chances |
| Opt for a lower interest rate | Maintain a high credit score |
| Ask about prepayment | Allows flexibility to repay early |
| Choose shorter tenure | Reduces total interest paid |
| Timely EMI payments | Protects credit score and avoids penalties |
| Compare lenders and negotiate | Get the best possible terms |
