5 Factors One Should Know Before Applying for a Personal Loan

An immediate personal loan is one of the most convenient and popular financial tools. Personal loans accounted for almost 41.6% of incremental credit growth during FY17. These advances do not have any end-use restrictions, one of the primary advantages why numerous individuals opt for such loans to address short-term financial requirements.

People can use the sanctioned funds to cover unforeseen or pre-planned expenses and repay at nominal interest rates.

Those who want to take an immediate personal loan must consider the following factors to make the finance availing process more comfortable.

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  Decide on the required amount

The applicants should calculate their actual requirement before committing to personal loans. It is usually not advised to borrow more than what one needs. Consumers may attract high interests resulting in more debts if they go overboard with the credit.

• The credit score is crucial

Loan seekers also need to have a closer look at their credit score. Lenders check this 3-digit number to evaluate the applicants’ credibility. As personal loans are unsecured, lenders emphasise a borrower’s creditworthiness with his credit score & history.

A score of 750 and above is considered to be ideal for the approval. Lower score than this signifies poor debt management skill and may result in direct rejection. Furthermore, they shouldn’t apply for multiple loans simultaneously to avoid negating their credit score. In such a scenario, debtors have to pay a high rate of interest if the loan gets approved.

• Choose the right tenor

Lenders offer borrowers the flexibility of selecting a tenor to avoid any financial burden. So, it’s vital to make the right choice as it has a direct impact on EMIs & interest rates. Longer the repayment schedule, more is the interest. Several NBFCs provide a convenient plan ranging between 12 months & 60 months to suit people’s monetary condition.

• Read the fine print

A number of charges remain associated with a personal loan. For example, missing payments deliberately can attract a substantial penalty. So, it’s essential to stay aware of such charges.

• Eligibility criteria and documentation

Applicants should be between 23-55 years with a stable job while applying for the loan. A loan seeker may take the aid of a personal loan eligibility calculator to have a vivid idea of each necessary quality.  They also need to produce documents including the KYC, employee ID card, salary slips, etc. to complete the verification process.

Meeting all these factors quicken the process of approval and disbursal of a loan amount.

People can get a plethora of benefits with an immediate personal loan such as:

• High loan amounts up to Rs. 25 Lakh are offered by many financial lenders to meet multiple financial crunches.
• Consumers can enjoy income tax deductions on the paid interest if the borrowed sum is necessary for business purpose or construction/purchase of residential property.

However, an applicant must do a comparative study on various NBFCs to get a competitive interest rate. Many lenders sanction the loan on the spot if the consumers have a pre-existing relationship with the same.

So, getting an immediate personal loan is no more a daunting task once the applicants consider all these aspects. Examining all these factors above-mentioned not only speed up the process of approval but also ensures the best possible loan terms and features.