Lately, banks have seen a ballooning of their retail loan books in the last eight years. Why? It’s become so easy to get a personal loan. You can get a loan amount disbursed into your account within an hour. You can even attempt a hassle-free online loan application. And so many other services that make the process so simple, easy, and quick.
RBI data shows that in May 2010, banks had seen a total outstanding personal loan amount of ₹5.89 lakh crores. In June 2018, it jumped to ₹19.33 lakh crores. Consumer loans in May 2010 were ₹8,138 crores and in June 2018, they bumped up to ₹20,300 crores.
We have seen the rise and rise of personal loans, because of this easy application and approval process. However, this easy process can make you fall into a debt trap if you are not careful in selecting affordable personal loan amounts that are aligned with your. But here’s where we come in by giving you the right things to look at and understand when finding out that right amount. Primarily budgeting your current debt and expenses to your income, determining affordable principal amounts and EMIs, and finding the cheapest interest rate.
When thinking about how much you should borrow, a personal loan calculator will be your best friend. The Bajaj Finserv Personal Loan Calculator on Finserv MARKETS is a great tool to get a rough breakdown of payments you need to make based on your chosen loan amount. After adding your chosen interest rate and tenure period, you get a rough translation of the regular EMI amounts you will be paying.
Source: Bank Bazaar
Calculate the total amount of debt you owe
Before taking up a personal loan, look at your current debt consumption. Are you paying off other big loans like a car or house loan? Do you have a high monthly credit card bill? For an easy calculation, take a look at your CIBIL report to see a big picture of your total debt repayments you are making and what you owe. Then, look at all your other monthly expenses like rent, living, food, and entertainment. Put together the total amounts against your gross or monthly income to see how much you have left. If you have a good amount of salary remaining, start budgeting to see how much extra EMI you can afford to pay per month with the income left. However, keep in mind, banks do look at loans you are currently paying back aside from the loan you are applying for. You begin budgeting
Determining an Affordable Principal Amount
Most banks and credit providers have put a maximum limit of INR 25 lakhs for a personal loan to one individual. Usually, you are eligible to borrow a loan amount that goes up to 30 times your monthly income. The amount you borrow ideally depends on your income and find a principal amount that gives you a matching EMI based on your chosen tenures and interest rates. All existing loans you service are being considered by lenders when they calculate the loan amount they will provide you. Understand your current income level and other financial liabilities to determine affordable personal loan amounts. Keep in mind, you are paying it back with interest, which can be heavy if you chose a longer tenure. Individuals with low incomes and few financial liabilities usually receive a more affordable loan amount. So even if you apply for a big amount, the bank only sanctions what you can afford. Before making your application, you can determine how your chosen principal amount will translate into EMIs using the Bajaj Finserv Personal Loan Calculator from Finserv MARKETS. You can choose a tenure period that suits your repayment capacity with an affordable interest rate between starting at 12.99%.
Calculate EMIs you can afford
Ideally, you should look at putting an EMIs to constituting between 40-60% of your monthly income. These EMIs include your monthly principal repayments as well as interest payments. For example, if you monthly income is ₹25,000, your EMIs should not exceed ₹15,000. You can vary these EMIs of principal and interest payments by changing your tenure length based on the loan amount you wish to borrow, which can go up to 30 times your income. To find affordable personal amounts, you should see how the amount reflects into EMIs that you can pay regularly without defaults or delays. Before making your application, you can determine your EMI using the Bajaj Finserv Personal Loan Calculator from Finserv MARKETS. You put in your loan amount you wish to borrow with your preferred tenure period between 24-60 months and the interest rate you can afford.
Source: Paisa Bazaar
Choosing the right interest rate
Most banks and credit providers offer higher interest rates compared to home or car loans because personal loans don’t require security or collateral. The best you can do when applying for a personal loan is to get the cheapest interest rate within constraints. Generally, lenders look at various factors including the loan amount you requested, your repayment capabilities, CIBIL score, previous relationships with other banks, and the company you work for. After understanding a lender’s eligibility and requirements, you should visit an online financial marketplace to compare the personal loan offerings from different banks and credit providers. If you have a strong credit history with a bank or provider, ask for cheaper interest rates or better services.
Find out if a longer tenure will work for you
Longer tenures means get ready for a higher interest rate while shorter tenures giving you a lower interest rate, providing the loan amount you borrow isn’t too high. Usually tenures range between 24 to 60 months. Tenures will determine the repayment amount you shell out per month. So choosing the right tenure is a very critical choice to make after thoroughly weighing the pros and cons of a long-term loan for you. You need to prepare for the repayment period to ensure you pay on time and avoid extra inconvenient charges. So, while a longer tenure may get you lower EMIs, they get you lower EMIs but the build of interest payments are significantly higher in a long-term loan. You also become a debt bearer for a long-time, taking away chances to other big secured loans like a home or car because long-term personal loans will reduce your eligibility.
Now these are some general guidance tips for you, ensure you maintain a good CIBIL score and credit history to show proof of your capacity to repay the loan amount back. Any default or delay in repayments ruins your chances of getting the whole amount you need with a good tenure and interest rate. On Finserv MARKETS, you can some great pre-approved offers on personal loans after sharing a few basic personal information about yourself. If you have a financial emergency and need quick personal loan, you can get your loan approved within 3 minutes and amount is deposited in your account within 24 hours. Overall, do your budgeting of expenses and financial liabilities to determine affordable personal loans amounts with interest rates and tenors for affordable EMIs. Now go on and start finding that right amount if you are in a financial fix.
Finserv MARKETS, a subsidiary of Bajaj Finserv, is a one-stop digital marketplace that has been created for consumers on the go. It offers 500+ financial and lifestyle products, all at one place. At Finserv MARKETS, we understand that every individual is different. And that’s why we have invested in creating a proposition – Offers You Value. A value proposition that ensures you get offers which are tailor made for you. We also offer an amazing product range and unique set of online offers across Loans, Insurance, Investment, Payments and an exclusive EMI store. Be it in helping you achieve your financial life goals or offering you the latest gadgets, we strive to offer what you are looking for. From simple and fast loan application processes to seamless and hassle-free claim-settlements, from no cost EMIs to 4 hours product delivery, we work towards fulfilling all your personal and financial needs. What’s more! Now enjoy the same benefits in just one click with our Finserv MARKETS App.