As we’ve often maintained, personal loans aren’t always planned, and it helps to have a healthy financial record so that your personal loan application is not rejected. One of the many benefits of a personal loan is that the application process is quick and easy, the amount is disbursed in a swift manner, and you don’t have to worry about providing any collateral to get the loan. At the same time, the absence of collateral can lead to higher rates of interest. Despite the ease of a personal loan application, it is money that you’re borrowing and one that you need to return within a certain period. Therefore, you’ll have to keep certain factors in mind when deciding the personal loan tenure. Measure your monthly budget Borrow only what you know you’ll be able to afford and eventually return. It’s possible that you own a credit card and another loan, possibly a home loan or a vehicle loan. Therefore, you’re anyway going to have some loan EMIs to pay off. Choose a personal loan tenure that won’t dent any of your existing EMI plans. Ensure that your personal loan tenure doesn’t adversely affect your financial situation or dent your emergency fund. Personal Loan tenure and amount Choose a loan tenure and amount that you can afford. Based on the amount you borrow and the time period you choose to return it, you’ll come to the EMI you’re supposed to pay. Know that a longer tenure may mean a smaller EMI, but it could also mean a higher interest rate. Therefore, be very careful of how much exactly you will have to shell out eventually. In addition, when going through the terms and conditions of such a financial transaction, find out if there are there any foreclosure charges, and how expensive that can get, how will foreclosing your loan impact your credit score, and how financially prudent is it really to foreclose your loan at the time you choose to. Some lenders also offer customised personal loans where users pay only for the amount that they actually use – find out about such lenders and choose your tenure and amount accordingly. Healthy credit score This three-digit number ranging from 300 to 900 is a determining factor for whether you can even qualify for a personal loan, and once you do, how much interest you will end up paying. As always, a higher credit score, upwards of 750 deems you reliable and may encourage a lender to lend you money at a reasonable rate of interest. Therefore, keep checking your credit report and note any negative change in your score to take immediate corrective action. Reasonable rate of interest If you’ve been a practitioner of healthy financial habits, chances are you have a good credit score and are in good books of lenders. If you have a good repayment history, lenders will look at you as a reliable borrower. When going for a personal loan tenure, be aware of the rate of interest on your loan – it shouldn’t end up exceeding the original loan amount. Longer loan tenures aren’t necessarily conducive for you may end up paying higher interest. Shorter tenures will mean your EMI will be slightly steeper, but the rate of interest may well be within reasonable range. Thorough due diligence Again, because it’s borrowed money that you will eventually repay with interest, it is absolutely necessary to see that the lender is an RBI-approved and regulated entity. Try not going for the first lender you come across, despite the ease of approval and repayment. Do basic market research, because it’s not the best idea to have to not get any loan amount when you need it the most because the lender was bogus, or end up getting caught in a debt trap. When one is in severe need of money, it’s easy to forget to keep track of one’s budget. As a result, there can be situations where people take loans to repay their existing loans. Do not fall into such a debt trap, which is likely to negatively impact your financial situation.