Top 7 Considerations Before Applying for A Personal Loan

Personal Loan

Whether you want to fund your child’s higher education, pay off your high-interest outstanding debts, or have a medical emergency, Personal Loans come in very handy as there are no restrictions on the usage of the loan amount. These loans are easy to procure as compared to home loans and car loans because lenders do not require a guarantor or collateral for Personal Loans. Most top lenders offer these loans with simple eligibility criteria and minimal documentation. Hence, you can apply for a Personal Loan to fulfil any of your financial requirements.

But it is imperative to have all pertinent information before you fill online personal loan application. It not only improves the chances of your loan being approved but also helps you avail of a loan at attractive interest rates. 

Let’s have a look at some important things that you must consider before applying for a Personal Loan:

  1. Maintain a Good Credit History

A credit score shows your creditworthiness based on your repayment history. It’s a 3-digit numeric summary that ranges from 300 to 900 and a score of 750 & above is considered good. A good credit score helps you avail of a loan at attractive terms. On the other hand, a poor credit score reflects your bad debt management, and it may even result in loan rejection, or the lender might offer you a loan at a high-interest rate. 

So, if your credit score is poor, you can improve it by simply paying your dues on time. A smart way of ensuring this is automating your repayments. Another good way of improving your credit score is by reducing the number of credit cards used and ensuring that continue to utilize your old credit cards responsibly. Also, keep in mind that you should not exceed your credit utilization by more than 30%. 

  1. Evaluate Your Repayment Ability

Before borrowing a Personal Loan, make sure you prepare yourself for its repayment. You can do this by ensuring that your monthly income is enough to pay the monthly EMI comfortably. Also, you must have a calculated plan to estimate your EMI and consider your other debt repayments and financial obligations to know your ability to pay your loan on time. 

For this, you can use Personal Loan EMI Calculator to estimate your monthly EMI well in advance and plan your loan repayment accordingly. 

  1. Consider Your Requirements to Choose the Right Loan Amount

Since most top lenders offer fast approval of Personal Loan and the amount is disbursed in a matter of few hours or minutes, it is easy to get carried away and apply for a higher loan amount than you require. But it is important to calculate how much money you need for your immediate financial requirements and limit your borrowing to that specific amount. 

  1. Read the Fine Print with Utmost Care

The loan agreement must be read mindfully to ensure that you’re not in for unwanted surprises later. Read the fine print to understand all the fees, charges, and penalties. Doing this will ensure that you are aware of all terms & conditions of your loan. It will assist you in making timely payments and clearing your debts in a hassle-free manner. 

  1. Assess All Charges

There are various charges such as processing, prepayment or foreclosure, and late payment charges associated with a Personal Loan. Before you borrow a loan, consider these charges to get a clear estimate of the expenditure. It can help you manage your finances better and help you know whether you can afford the loan. 

  1. Compare Interest Rates by Different Lenders

Comparing the Personal Loan interest rates offered by different lenders ensures that you get the lowest interest rate. You can easily compare the interest rates online. This enables you to find out the loan at the lowest rate of interest, making loan repayment easier and more comfortable. 

  1. Avoid Falling for Gimmicky Offers

Some lenders in the market offer gimmicky Personal Loan schemes and artificially low rates of interest. But when you go through the fine print, these loans often turn out to be more expensive than you expected. Also, such loans are usually based on floating interest rates. This makes the interest rate appear low initially, but the interest rates can increase substantially as time passes in case of policy changes. 

Also Read: Who’s Eligible for an Emergency Medical Loan?

In a Nutshell

Keeping these simple tips in mind before applying for a Personal Loan will help you avail of instant access to funds in a smooth manner. 

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