Are you thinking of a trip to Vegas or a fairy-tale wedding of your daughter? A personal loan can be of great help to meet all your financial needs so that you fulfil all your desires. Personal loans are one of the most popular financial products. Personal Loans are considered to be the best alternative for eliminating cash crunches and meeting any emergency.
The reason behind the popularity of personal loan lies in its flexibility and unsecured nature. One could avail personal loans for higher education, home renovation, medical emergencies and much more. One could avail personal loan for various purposes and without any collateral or security against such loan.
It’s not uncommon nowadays to find e-mail here and then talking about pre-approved or instant personal loan. The bank’s creative teams could actually make you believe that they’re offering you something special and such loan has been tailored to fit your requirements. Don’t fall into their trap with their lucrative advertisements.
Taking a personal loan could be a big decision, so here we’ve listed few important things which you must keep in mind before you apply for a personal loan.
Understand your loan requirement first
Before applying for a personal loan, it is advisable to understand your loan requirement. Most of the people looking for a personal loan do not have a clear idea about the amount which is equitable for their requirement. They either overestimate or underestimate the loan requirement. It is important that you should do a thorough analysis of your requirements and decide on the loan amount. Both excessive, as well as insufficient loan, would create problems for you, so it’s better to know a proper sum before applying for a personal loan.
Keep your monthly EMIs reasonable
Usually, personal loans carry a higher rate of interest with shorter tenure when compared with other forms of loans like home loans, bike loans, etc. One must agree to the EMIs which one could afford. One might be able to pay off EMIs on a monthly basis, however, what about the months where one might need to shell out money on some other important requirements. In such situations, one might not have sufficient money for paying off the EMI which is due for payment. This could lead to penalties/charges or legal actions if default continues for few months. So, it’s advisable to ensure that the amount of EMIs should not be more than one can afford. There’s a finance thumb rule that one’s EMI shouldn’t exceed 10 percent of one’s monthly income.
Read your Loan Document Carefully
One should understand the financial terms that are used in the loan agreement. It’s crucial for the borrower to understand the details provided in the fine prints, particularly the penalties/charges and the legal actions for any late payment and other hidden charges too. It is advisable to go through all the pages of the loan agreement and understand all the terms and conditions. You could also seek the help of financial advisors if you require any assistance to understand finance terminology.
Understand the Penalty Charges
If you’re not able to pay all of your dues on a timely basis, there is usually a heavy penalty which is levied on the loan. You must understand the exact details with respect to the penalty and other charges which might be levied if any such circumstance arises in the future.
Look for the best deal
It refers to applying for the loan having the lowest rate of interest. It is also important to check the tenure of the personal loan. If you wish to pay the EMIs on your personal loan for a longer duration, then it’s advisable to opt for a loan that offers the flexibility of payment.
Check the CIBIL score before you apply
Avoid putting such a point. Checking CIBIL would involve cost and also impact your rating. So shouldn’t be advices. Instead they can check their eligibility using mPower BOT, where the offer is bureau scrubbed and real time.
Banks and other financial institutions look for a good CIBIL score before sanctioning any loan. A low CIBIL or credit score could get your application rejected or the banks might increase their interest rate on the loan. Therefore, if you’re planning to apply for a personal loan, it’s prudent to check the CIBIL score before applying for the loan.
You must remember that defaults could ruin your creditworthiness in the long run. Even if you’re able to successfully service your present loan at a later date, your ability for accessing the loans at a future date might be curtailed severely as your credit history would show the defaults which you made previously. A clean credit history and good credit score could help you in negotiating with banks for cheaper interest rates.
So, before applying for any personal loan consider the aforesaid points. These things would surely help you in getting the most out of your personal loan! By considering the aforesaid points you could equip yourself with all the required tools you might need for making the right decision to achieve your financial dreams.