Personal Loans are one of the best options to fund your financial needs, especially without anyone’s help. You require a good credit score, reliable monthly income, clean financial history, and required documents to get the loan amount directly in the account.
Secondly, with the online application, e-KYC, and algorithm-based portals, the processing of personal loans has become smooth, easy, safe, and
faster. It takes a few minutes to complete the application, documents submission, complete the personal loan procedure. Several banks and Financial Institutions provide instant loan approval and disbursal within a day facility.
Financial independence and the digital revolution have made personal loans the most sought-after financial product.
Despite several benefits, there are points to consider before applying for personal loans, that we will discuss in the following paragraphs.
Tips to Consider for Personal Loan
Apply when you Really Need It
Personal Loans are collateral-free unsecured loans. Banks and FIs charge higher interest rates in comparison with Home Loans and other loans. You must understand that the loan amount will be payable in terms of EMIs for one to five years. With higher interest rates, EMIs take a significant share of your monthly income.
Personal loans support your financial distress and fund short-term goals, but you also need to consider financial consequences over the loan tenure for better planning and preparedness.
Know the Other Charges
Banks and Financial Lenders charge several additional charges apart from the interest rate. Additional charges include Processing fees, verification fees, Penalties on late payments, Prepayment or foreclosure charges, Taxes, etc.
Know these charges, ask your relationship manager or bank manager, and make an informed decision about the personal loan amount.
Shorter Loan Tenure
If your financial condition allows, always go for shorter personal loan tenure. Though it might
seem tempting to go for a longer duration of loan tenure for low equated monthly installment, you actually land up paying a lot more than the principal amount at the end of the loan period.
The longer the repayment tenure, the higher will be total amount payable in terms of interest. Shorter the loan tenure, the lesser the interest amount. Consider this to save money in the long run by paying some extra EMI amount monthly.
Credit score plays a vital role in planning for a personal loan. Always maintain your financial records strong, transparent, and organised. There should not be defaults, repayment delays, and disputes.
Banks and FIs prefer borrowers with a credit score of 750 or above and process the loan faster
in comparison with people with a low credit score. A higher credit score gives you an edge and scope to negotiate for better deals.
Compare and Understand
Several comparison websites are available online. They list and update all the latest personal loan offer from leading banks and financial institutions. Go to these websites and read all the loan offers but do not apply on multiple websites, it will affect your credit score and any loan eligibility in the future.
You need to go through interest rates, processing charges, repayment procedures, and unique features that need consideration.
Understand the terms associated with the personal loans, choose the best loan offer to fulfill your fund requirements, and apply.
Browse and Select Affordable Interest Rate and EMIs
Interest rates and EMIs are the most essential considerations before applying for a personal loan. It’s become all the important if you are a first-timer, looking to get fund support for financial needs and emergencies.
Interest rates vary a lot with personal loans. You can get loan offers with personal loan interest rates at as low as 10.25 percent per annum and as high as 24 per cent per annum. Given its difference and impact on the total amount, research the best interest rates to save on the loan amount and lower EMIs.
EMIs or Equated Monthly Instalment is repayment of the personal loan monthly as per agreed terms and amount. Go for higher EMIs and shorter loan tenure to save on the interest payments.
Credibility of Lender
There is no need to doubt the credibility of PSU banks and leading Private sector banks such as ICICI Bank, HDFC Bank because they have decades of legacy and tons of capital to support their operations and financial products.
Credibility comes with an influx of several digital lenders, mobile apps for loans, and other online platforms. Go online, check company credentials, online reviews, and their fund support in terms of investors and directors.
These things make the financial body reliable and accountable. They should be governed under provisions of RBI, if not, tread carefully.
For secure and faster transactions, you should go with PSU banks, leading loan distributors such as Andromeda, and leading private banks. All of them have joined the digital revolution through websites, Applications compatible with all digital devices.
Consider loan insurance and stay protected against unforeseen future events. Pay premiums along with EMIs, and the lender will cover the loan in case of your demise or loss of income sources.
These tips are mentioned to take a calculated and informed decision about personal loans for your financial requirements. There is nothing to discourage your plans but only to make you more prepared. Personal loans are surely one of the best financial products that meet your short-term financial goals with collateral-free fund support. Plan wisely and apply for the best personal loan considering all the above suggestions and tips.