Planning to take a personal loan? Strike a balance between EMI and tenure

Avoid personal loans. But if taken out of necessity, get rid of them quickly

Sanjay Kumar Singh
Last Updated at August 11, 2019 21:12 IST

With the Reserve Bank of India (RBI) reducing the risk weight on all categories of consumer loans from 125 per cent to 100 per cent, banks would be more willing to extend personal loans.
A recent survey by consumer finance firm Home Credit India showed that personal loans are the third most popular category of loans after consumer durable and two-wheeler loans.
Banks are nowadays willing to offer pre-approved personal loans, especially to their existing customers.
Fintech companies also offer such pre-approved loans based on the customer's credit profile, income and stability of employment.
Before taking such loans a person should compare the interest rates charged by various players.
Remember that the total of your EMIs should not exceed 40-45 per cent of your take-home salary.
Taking a longer tenure loan will lower EMI, but it will enhance your overall interest burden

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