A personal loan is an unsecured loan that is offered by banks and non-banking financial companies (NBFCs) that are available for both salaried and self-employed customers. An unsecured loan is a loan that does not require any sort of security or collateral and can be availed quickly and seamlessly. The personal loan interest rate is usually higher than any other loan types due to the risk that the bank or non-banking financial company (NBFC) might have to endure. A personal loan can be used for almost anything that is financially legal such as wanting to buy the newest smartphone, home renovations, medical expenses, vacation expenses, wedding costs, higher education expenses, etc. There are multiple banks and non-banking financial companies (NBFCs) that offer cheap and quick loans at a fixed personal loan interest rate. Some benefits of taking a personal loan are:
- Unsecured, thus no need to keep collateral or a security.
- Fast loan approval and disbursal.
- Minimum amount of documents required.
Though, a personal loan has many benefits, it is still advisable to do your research. A personal loan is very high-risk and high-debt type of loan. Therefore, here are 5 things you should keep in mind before you take a personal loan:
- Choose the right lender- There are many lenders who might try to take advantage of your financial needs. Banks and non-banking financial companies (NBFCs) bombard customers with different offers and promises of a low personal loan interest rate. Do not fall for the first lender that comes your way. Do not choose a bank you might have a previous relationship with, if you do not agree with their personal loan interest rate and other factors. You might miss out on much better deals if you don’t do your research.
- Compare the personal loan interest rate of various lenders- If you compare the personal loan interest rate of various banks and non-banking financial companies (NBFCs), you will get the lowest rate in the market. You can then choose a personal loan that has a low interest rate and is best for you.
- Make sure you are able to repay the loan- Before taking a personal loan, it is important that you make sure you are in the position to repay it as well. If you do not pay the estimated monthly estimate (EMI) in a timely manner, there is a chance that you will be penalized. Also make sure that your income is enough to pay the EMI and at the same time, enough for you to sustain yourself.
- Keep your credit score looking pretty- This is one of the most important things you need to keep in mind before taking a personal loan. Your credit score determines whether you are eligible for a loan or not. A score above 750 is considered the best credit score. Maintaining a pretty credit score is quite simple if you pay your dues on time and reduce your credit card usage.
- Have a stable job and income- Most banks and non-banking financial companies (NBFCs) require you to have at least 2 years of work experience. If you want to take a personal loan, do not continuously switch your job.
We hope this article gave you an idea about what you need to do before taking a personal loan and we hope your loan application gets approved and your financial needs are met!