New Delhi: Applying for your first personal loan can feel exciting but also overwhelming, especially if you are unfamiliar with how these loans work. A personal loan is an unsecured form of credit, which means you don’t have to provide any collateral such as property or gold to secure the funds. Because it can be used for multiple purposes like weddings, education, medical emergencies, travel or even debt consolidation, personal loans have become increasingly popular. However, before applying, it’s important to understand key factors that can affect your eligibility, borrowing cost and repayment burden.
The first thing you should look at is your credit score. This three-digit number, usually ranging between 300 and 900, reflects your repayment history and overall creditworthiness. Lenders often prefer applicants with a score of 750 or above because it signals responsible financial behaviour. A higher score not only increases your chances of getting approved but can also fetch you a lower rate of interest, which reduces your EMI burden. Checking and improving your score before applying can save you a lot of money in the long run.
The next step is to compare interest rates and charges across lenders. Personal loan rates in 2025 vary widely—from as low as 9.99 percent with some private banks to over 21 percent depending on the borrower’s profile. Apart from the interest, lenders also levy processing fees, prepayment penalties and late payment charges. These hidden costs can make a big difference to the total amount you repay. Taking time to compare multiple offers and reading the fine print ensures you don’t end up paying more than necessary.
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Equally important is to borrow only what you actually need. Many first-time borrowers make the mistake of opting for the maximum eligible amount, only to later struggle with high EMIs. Calculate your requirement carefully, consider your repayment capacity, and align the loan tenure with your financial situation. Reviewing the loan’s eligibility criteria and required documents in advance can also help avoid last-minute surprises. Finally, if you are unsure, consulting a financial advisor is always a good step. By disclosing your income, existing obligations and future goals, you can get professional guidance on whether a personal loan is the right choice for you.
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