The curve of borrowings by Indians shows a steady upward movement in recent times. Particularly young people are borrowing for their travelling plans and luxury goods in their day-to-day lives. And this is where the demand for Personal Loans is spiking every year.
Personal Loans in India are multipurpose credit facilities with features unlikely to be found elsewhere. They offer easy access to funds without end-use restrictions and at a competitive interest rate.
However, knowing a few essential things will help you find the right option if you are planning to apply for this credit facility.
Essential Things to Keep in Mind While Applying for a Personal Loan
Here Are a Few Things to Keep in Mind Before You Apply for a Personal Loan
Maintain a Good Credit Score
A good credit score is a must to get a good Personal Loan deal. With a high credit score, you can show that you are a reliable borrower and are unlikely to default on the loan. When you have a high score, you can negotiate with the lender for a better rate of interest, better terms for repayment period, amount of EMIs, fast approval etc. Therefore, try to maintain a high credit score of above 700 or so.
Borrow only the Right Amount
It is easy to access Personal Loan. It can be approved instantly, and the application process is uncomplicated. People can get easily carried away by the lure of easy cash. But at the end of the day, a loan is always a burden.
So borrowing in excess amounts will never do any good, and it will bring extra interest costs and longer tenure. On the other hand, a small amount will not be able to fully cater to your financial needs.
Hence, it is important to calculate the right amount you need and apply for that. Consider that your desired loan can have add-ons like processing charges and other associate fees. Now, calculate the final amount and borrow only for that.
Processing time of your Application
Anyone applying for a loan will want his loan amount approved as soon as possible. Any delay will irritate the applicant, especially for an emergency. Thus, it is better to look for a lender whose application process is simple and the requirements are not too much. Therefore, looking at the processing time of the application is important while applying for a Personal Loan.
The next point is to check the eligibility criteria. Every lender has some specific criteria that must be met. Usually, the requirements include meeting the age criteria, income criteria, credit score, etc.
So, go through the eligibility requirements of your lender and see whether you fit them all. If not, it is better to achieve those criteria first and then apply for the loan, ensuring your loan application gets approved easily.
Apart from the eligibility parameters, you need to note the documents required for this loan. Now, keeping these papers handy will help you during the loan application and streamline the whole process.
Rate of Interest
Interest rate is another point affecting the Personal Loan amount profoundly, and a higher interest rate will increase the total repayment amount and your burden, and vice versa. So, you need to review this before opting for a Personal Loan.
The interest rate is something that can be negotiated with your lender. If you have a good credit score and meet all the eligibility parameters, then you can get an attractive rate.
It is always better to clear all your debts as early as possible. The next point to check before applying for a Personal Loan is the option for part pre-payment of Personal Loans part pre-payment of Personal Loans.
Therefore, if you are planning to apply for a Personal Loan, then you need to review this pointer to ensure that you have the provision to close the loan early.
The repayment period affects the final loan amount and the EMIs. A longer repayment tenure leads to lower EMIs, but this way, you incur more interest; hence, the overall cost of your Personal Loan increases significantly. On the other hand, a short tenure means the monthly EMIs will be high. Ensure the amount of each EMI is within your payable limit, so you do not face any defaulting charges. So, the perfect choice would be to choose the EMI within your capability with a comfortable repayment tenure.
It is always advisable to enquire properly if your Personal Loan brings extra charges like documentation fees, joining fees, maintenance fees etc. All these additional charges ultimately add up to the final amount you must pay back. So look for a lender who does not charge these associated things.
These are some points you need to know before applying for a Personal Loan to avoid making any wrong financial decisions. Hopefully, this comprehensive guide has helped you understand how to approach the loan application to avoid facing any chances of rejection or taking up a debt that is ultimately too difficult to manage.