The Dos and Don’ts of Personal Loans

Dos and Don’ts

Personal loans are unsecured loans, require minimal documentation. It is one of the simplest methods to fund your financial requirements. You can avail of a personal loan in 24 to 48 hours with instant approval through AI-based applications if applied online.

Online personal loan application constitutes a major share of all personal loan applications in India especially after lockdown imposed due to Covid-19 Pandemic in March’21. Work from home, preference of social distancing, preferable interest rates, and other factors have pushed demand for digital lending.

Personal loans are multi-purpose and easier to obtain. Purposes could be diverse such as home renovation, buying of home appliances, emergency fund needs, and many more.

Though personal loans are perfect to fund your financial needs, there are factors to consider before applying. There are dos and don’ts, that you should ponder over for financial planning.

We will explain significant factors to plan in the passage below.

Dos for Personal Loan Application

Compare Interest Rates

Interest rates for personal loans vary from lender to lender. It is wiser to browse and compare different lenders’ offers. You can check comparison websites and loan distributors such as Andromeda for the latest and updated interest rates from leading banks and NBFCs of India.

Comparing different interest rates will help in making an informed decision. There will be enough data about prevailing personal loan offers, and choose the best one as per your specific requirements.

Personal Loan Interest Rates of Five Leading Financial Institutions as of November’21

Apna Paisa: Starting from 10.40 per cent per annum

State Bank of India: 9.60 to 13.85 per cent per annum

HDFC Bank: 10.25 to 21 per cent per annu

ICICI Bank: 10.50 to 19 per cent per annum

Bank of India: 9.35 to 12.35 per cent per annum

Decide on the loan amount

A personal loan should be to fulfill your financial requirements, and you should plan for the particular need only. It means if you need a loan for ten lakhs and has eligibility for twenty lakhs, applies for ten lakhs, not twenty lakhs. Do not overburden your monthly income with higher EMI and repayment options.

Though you might be eligible for more loan amounts, a higher loan means a more equated monthly installment. It is part of financial planning. Plan all incomes sources, expenses, liabilities, and decide on the loan amount that is financially viable for your monthly income during the loan tenure.

Compare Personal Loan Offers

You can calculate equated monthly installments, check interest rates, processing charges along with complete personal loan offers from leading banks and NBFCs at comparison sites. These sites maintain updated data on the features and benefits of the loan.

A borrower can refer to the data through loan distributor websites, analyze all the terms & conditions mentioned in the particular lender section. After analyzing and understanding, decide on the best personal loan for your fund requirements.

Additional benefit: You might find some special features, saving on the cost of borrowing, flexible repayment options, offers, and other additional benefits through browsing different lenders.

Check Eligibility

Another thing to do while the plan for the personal loan is, checking the loan eligibility. The online medium has made the process much simpler, faster, and efficient. The algorithm-based system filter-out the best personal loan offers and displays them on the screen.

Now, check your eligibility as per personal information, income details, and other data required from the lender. Comparing will help in getting the most suitable bank or NBFC. Finding the right lender will also improve the chances of personal loan approval because you have already checked your loan eligibility.

In this way, lenders also get genuine borrowers that will reduce chances of NPA and defaults in future


Do not decide in haste

Personalized email marketing and AI-based customer targeting cause several promotional and informative emails daily in our inbox. If you search online for personal loans, input your contact information on comparison sites, you will start getting emails for diverse types related to loan offers, discounts, etc.

Promotional emailers are normal. Do not decide on the first email received. Even if you like the offer, wait for more loan offers, compare them, and decide on the most suitable one according to the financial condition and requirements.

Do not apply for the maximum eligible loan amount

Your lender might offer a higher loan amount if you have a stable and good monthly income.

Having more income is good, but you are not earning for paying EMIs only, are you?

Consider your financial status, monthly expenses, required loan amount and apply for that amount only, not according to your eligibility. It is not a wise thing to put an unnecessary financial burden on your monthly income.

Avoid Multiple Loan Applications

Loan applications are of two types and affect your credit score in their individual way. The first one is a hard enquiry. When you apply hard enquiry for a personal loan or home loan, banks & NBFCs pull out your credit report to check creditworthiness. These credit reports are reported, which means if you apply several times, your credit score will decrease because the authorities will consider you as a casual applicant and probable defaulter. Hard inquiries remain in the system for around two years.

The second one is soft inquiry; it refers to a background check by a lender when you apply for a personal loan. It does not affect your credit score and is not recorded.

So, avoid too many hard inquiries, it will decrease chances of loan approval and future loan


A personal loan is a very useful financial instrument that serves your fund crunch situations effectively. Go through all significant points explained above and shortlist the best personal loan offers that suits your need and does not stress your monthly financial expenses as well as long term goals.