8 Things First Time Personal Loan Borrowers Should Know About
Renovations, weddings, unplanned medical expenses, college funding, and a slew of other costs are all part of life. Almost everyone struggles to meet these financial obligations. Personal loans are one solution to these problems.
You can now acquire a fast personal loan from the market’s lenders. The full loan application and sanctioning process is now made online to make things easy for both borrowers and lenders. Different lenders, however, provide loans with varying interest rates and repayment terms. Furthermore, their terms and conditions differ.
Before asking for a quick online personal loan, keep the following in mind:
1. Assess Your Needs & Repayment Capacity
Assessing if you need the loan should be one of the first items on your personal loan checklist. Personal loans have greater interest rates than gold or LAP, despite being the most straightforward type of loan. On the other hand, personal loans are a viable option if you believe there are no other options for obtaining funds or if you are certain of your monthly EMI allotment.
2. Choosing a Suitable Loan Amount:
It’s important to remember that you should only borrow money if necessary. It is true for all loans, but it is especially true for personal loans due to their high interest rates. Make a note of all your requirements and select which ones require the assistance of a personal loan. You will be paying interest for more than your need if the money is sitting in your account. To avoid needless losses, it’s essential to only apply for the amount of personal loan you need.
3. Check Your Eligibility and Credit Score:
If you meet all eligibility conditions, a personal loan can be disbursed and processed quickly. The lender will examine both your residential and work stability to estimate their liability. You’ll need to produce proof of a consistent income and timely tax returns if you’re self-employed. However, note that not all lenders offer personal loans to self-employed individuals. Your credit score, however, is the most important criterion for eligibility. The credit bureau determines your credit score or CIBIL score by analysing your credit history. Your credit score will be excellent if you have been making timely and regular payments on your previous loans and credit cards. You can choose a large loan amount as well as a low-interest rate if you have a good credit score and pass the lender’s personal loan eligibility check.
4. Choose Your Tenure Wisely:
Personal loans come with a range of tenure options from lenders. A shorter personal loan will require you to pay a larger sum in EMIs. However, if you stay for a longer period, you will earn more interest. As a result, it is usually preferable to reduce your monthly expenses by a small amount and choose a shorter term by paying a larger EMI.
5. Pay attention to your EMIs:
You must pay your monthly EMIs on time and in full. A single missed payment can significantly lower your credit score. So, using a personal loan EMI calculator, calculate your monthly payments and base your loan amount and term on this criteria.
6. Read the Fine Print:
Please read the following terms and conditions carefully: Assume you utilise an online EMI calculator to figure out the interest rate, term, amortisation, and monthly EMI, among other things. But what about late fees, foreclosure fees, processing fees, and so on? Before signing the dotted lines in the application form, it is best to read the fine print provided by the lender to get all of the specifics concerning the personal loan.
7. Learn about Prepayment Options:
You may take a personal loan to cover a short-term cash flow problem and consider prepaying your debt if you come across any money throughout your loan term. Prepayment reduces your personal loan’s term and saves you money on interest. Always check with your lender to see whether you have a prepayment option and if there is a fee for doing so.
8. Factor in the Processing Time:
Each form of loan has its own processing time. You may require a personal loan for an emergency, but the personal loan’s processing period may prevent you from doing so. As a result, always apply ahead of time or find a lender that can handle your loan quickly.
Personal loans can be beneficial if the repayment phase is carefully managed and the nuances of the financing process are understood.