7 Things to Keep in Mind when Opting for a Personal Loan
7 Things to Keep in Mind when Opting for a Personal Loan :In simple terms, a personal loan is an unsecured loan that individuals take from a bank, a non-banking financial company, or from other individuals who are willing to lend people money. This loan is usually taken by people for personal purposes such as renovating their houses, weddings, vacations, unexpected medical emergencies, starting a new business, fixing their cars, and so on and so forth. It doesn’t matter if you are a professional, a salaried employee, or a self-employed business person; if you want to avail a personal loan, you need to have a regular income.
Why take a personal loan?
Personal financial emergencies can arise at any time, and money is sometimes needed very urgently. As compared to other loans, personal loans are quickly approved. Usually, they are approved within 24 hours. Quick personal loans are highly useful especially in the case of medical emergencies. Another excellent reason why you should opt for a personal loan is that they’re very easily available. Almost all banks and non-banking financial companies offer personal loans. Personal loans can also be availed through peer-to-peer, or p2p lending.
The interest rates on personal loans are very reasonable, making them inexpensive when compared to the other loans. Before you decide to take a personal loan, here are a few things which you need to keep in mind.
Assessing the amount required
It is very important that you carefully assess the exact amount that you need. This will not only make things easier for the bank or company or person you’re securing your loan from but will also make things easier for you. Once you have a plan in your head and know the necessary amount required, you can move one step closer to obtaining a personal loan.
It’s imperative that you know your credit score before applying for a personal loan. Basically, your credit score is a three-digit number which essentially decides how likely you are to repay debt. Banks take a look at your credit score to decide whether or not they’ll approve you for a credit card or a loan. However, there are also P2P lending platforms that consider your credit score & various other parameters to decide whether you can acquire a loan or not and at what interest rate.
It’s imperative that you check the various interest rates available in different banks or NBFCs. Keep in mind that the lower the interest rate, the more affordable the loan is. Therefore, once you check the interest rates of all loans, you can make an informed decision in accordance with your loan needs.
Loan offers from different lending sources
It is very crucial for you to compare the loan offers from different banks. Even if the requirement for a loan is urgent, make sure that you don’t just grab onto the very first thing. The process of obtaining a personal loan should be dealt with meticulously. So yes, you need to take into consideration what every bank, company, or individual is offering you. And only then can you make an informed decision.
Before moving on to actually applying for a loan, it is very important that you calculate your EMI. EMI, which stands for Equated Monthly Installment, is a fixed payment made to the lender by the borrower at a specific date each month. There are two ways to calculate EMI – the flat-rate method, and the reducing-balance method. You can easily calculate your EMI on the internet. There are a lot of P2P lending platforms as well that help you calculate your EMI.
More often than not, people are able to pay back their loans before time. In that case, many banks and companies and other borrowing platforms have a charge ready for you. So, it’s important for you to look into these prepayment charges before signing any documents. Certain P2P lending platforms function on no prepayment charges but it’s always important to check.
Terms and Conditions
Yes, terms and conditions are boring to browse through, but where important things like money are involved, you have to scrupulously read through the terms and conditions provided to you. Only once you’ve been through them thoroughly, should you sign the final documents.
Once you follow all these rules, you will be 100% ready to obtain your personal loan!