Personal Loans have become popular funding options due to their digital application procedures, zero paperwork, no collateral requirement, instant approval, and rapid disbursal. Moreover, the interest rates are competitive, repayment terms are flexible, and lending institutions impose no usage restrictions on these online loans. Whether you need funds for a wedding, education, medical emergency, home renovation, or foreign travel, fulfil the lender’s Personal Loan eligibility criteria to obtain them quickly. However, you must consider a few key things before applying for one. Here is a brief outlook.
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– Analyse Your Funding Needs
Before choosing an NBFC for a Personal Loan, the first thing to consider is determining your funding needs. Personal Loans are easy to obtain and offer quick fixes for urgent money needs. However, considering the loan requirement is essential as you must repay the loan with interest.
Borrowing more than you need leads to unnecessary financial burden and heavier monthly instalments. Therefore, before borrowing, evaluate your financial condition and ensure you can adjust the monthly EMIs into your budget for a certain period without hassle.
– Maintain a Consistent Credit History
Checking your credit score before applying for a loan is essential to ensure your qualification. A high credit score assures the loan provider of your repayment capacity by proving your responsible behaviour towards credit. A credit score above 700 is considered good enough to convince lenders of your creditworthiness.
You can build and maintain a good credit history by paying your credit card bills and loan EMIs on time, diversifying your credit portfolio by different credit types, retaining old accounts, and maintaining low debt-to-income (DTI) and credit utilisation ratios. Activating an e-mandate for automatic payments is an excellent way to ensure timely payments without remembering them.
– Evaluate Overall Finances Before Borrowing
If you have a decent income with several earning members in the family, you may take a bigger Personal Loan with consistent EMI repayments. However, if your income is low, evaluate your finances and consider your loan requirements carefully. List down your needs to prioritise which ones you must finance first. For instance, higher education is more important than a foreign vacation. So, evaluate your finances and prioritise the expenses before applying for a Personal Loan through an NBFC.
– Assess the Loan-related Costs
When you borrow a loan, you must repay it to the lender in instalments along with interest. However, apart from the loan EMIs and interest outgo, you must consider additional loan costs as well, including processing charges, prepayment fees, late payment penalties, etc. All these charges may add up to increase your loan cost significantly. Therefore, assess these costs before availing of a Personal Loan. Ensure your lender specifies these charges clearly in the loan document, and read the agreement carefully before signing it.
– Check the Fine Prints
Checking the fine print before signing a loan agreement is indispensable before borrowing a Personal Loan. Read the loan document carefully and ask the right questions to confirm every small detail before signing. You can call the lender’s customer care or visit their website to check their status and credibility. Read their online reviews to see what their existing and past customers say about their service. Reading the fine print will also let you identify any hidden costs related to repayment, foreclosure, or deferred payments.
– Compare the Interest Rates
You can get an unbelievably low-interest rate by researching and comparing loan plans from various lenders. A lending institution will determine your Personal Loan eligibility and interest rate based on your income, DTI ratio, occupation, work experience, repayment history, credit score, etc. Managing a lower rate will directly save you money by reducing your EMIs and total loan costs. Therefore, compare the interest rates on different loan schemes to get the lowest offer.
– Choose an Appropriate Repayment Tenure
Loan providers offer flexible repayment terms, allowing you to choose an EMI plan suitable to your budget. You can opt for a longer term if you want to keep the EMIs manageable or go for a shorter duration if you can afford bigger EMIs. It will help you become debt-free sooner.
Several lending institutions have Personal Loan EMI Calculators on their websites, which you can use to check the EMI amount based on your loan amount, interest rate, and repayment tenure. Compare various repayment plans to finalise one that best fits your monthly repayment capacity. Choosing an appropriate loan tenure will ensure a loan plan suitable to your needs without stressing your budget.
– Focus on Your Needs, Not Eligibility
Borrowing a loan is not advisable just because you are eligible for it. Many lending institutions offer ample loan amounts to cover various needs. You may feel convinced to take out a larger loan because it is available with low-interest rates and favourable terms and conditions. However, it is not a wise move to make.
Calculate the exact amount you need for your intended expenses and borrow only the minimum required. Overborrowing will stress your finances, increase your debt burden, and lead to unnecessary expenditures through interest costs, processing fees, and other additional charges.
– Measure Your Repayment Capacity
Preparing for the loan repayment and checking your Personal Loan eligibility are important parts of the application process. Create a detailed plan to calculate your EMIs while considering your monthly income and financial obligations. Judge your repayment capacity and opt for a loan term with EMIs you can easily afford to pay monthly. If you have a decent credit history with low financial obligations, you have more negotiating power to grab the lowest interest rates from lenders.
These days, NBFCs offer Personal Loans within a short span. NBFC personal loans can provide quick financial assistance when needed. However, like any other financial product, they require sound financial planning for timely repayment. Consider all the key points in this article to be a smart borrower and handle your loan responsibly. Compare loan plans, choose the right lender, and opt for an adequate repayment plan to make your Personal Loan a beneficial product to meet your financial requirements.
