Important steps to consider before applying for a personal loan
A personal loan is an unsecured loan, you can easily avail it with minimal documentation from any bank or non-banking financial institution to meet your personal needs. The risk factor is high for banks because there is no security or collateral involved and that’s the reason bank charges high-interest rates on these loans. However, it has many edges over other loans and it can be used for any purpose, the bank will not ask you where you are using the amount, unlike other loans. But, still, you should consider a few important things before applying for it.
Reason- Why you need a personal loan?
First of all, check the reason of your requirement and ask yourself why you need a personal loan? If it’s not the necessity and you can manage without a loan, then give it a second thought. If you are taking a personal loan for traveling, shopping, pay the debts than its better to dig for the other ways first because taking a personal loan is easy but maintaining every month EMI is not.
The mismanagement and burden of EMI can ruin your budget, savings as well as peace of mind. It’s a big commitment that you must tolerate for years in terms of installments, so be sure what you’re getting is worth the chunk of your budget you’re devoting for the installments. If it’s an emergency situation, such as medical emergency then nothing can be more helpful then personal loan because in such situation you don’t have much time to run behind the banks or not even in a state of arranging documents and then wait for the approvals.
Market research- compare interest rates, check out for the offers and reviews.
Market research is the next important thing to consider once you have decided you need the personal loan. Before applying check for the interest rate, comparing the rates offered by different lenders which will enable you in getting the lowest possible interest rates in the market or a type of interest that’s best for you, making the repayment of EMI comfortable and easier. With a simple step, you can compare the rates offered by different financial institutions like Paisabazaar, Bankbazaar, Myloancare, etc.
The mistake common people make is they just go to their banks and ask for the loan because of the trust and to avoid headache involved in research or checking out with other banks. By doing so you limit your options, that’s why it is suggested to compare and research before applying. Another thing that can save you from the future headache is considering reviews, customer service and reputation of the lander. The reviews will let you know the satisfaction level of previous customers which can save you from the long-term hassle. People generally ignore it and then end up regretting their personal loan choice, don’t repeat the common mistake, check the reviews and save yourself from falling in the trap of scammers or predatory lenders.
Check for Hidden Charges
Reading terms and condition may feel troublesome and like a long never-ending process, but it’s a good habit to read all the documents carefully before signing, even if it looks like it will take you forever to get through all of it. Once you will read the documents, you will get to know the hidden charges, there can be lots of hidden charges as well as terms and conditions associated with the loan, which can be negotiated but only if you know about them. If those charges will be missed, they will come up as a loss for you and you will end up paying more than you have planned for.
credit scores are important
A credit score or the CIBIL score represents your creditworthiness which is based on the history of your previous transactions or credit repayment. CIBIL score range is between 300 to 900 and a score above 750 is considered as ideal, lower CIBIL score signifies low creditworthiness or bad debt management which can lead to the rejection of loan or a loan with very high-interest rates on the amount. In such a situation, it is better to improve your credit score first. To improve your scores, you can simply pay all your dues on time, reduce the number of credit cards, keep using the old one while maintaining a good credit history.
Also, you can keep a check on your credit score regularly, so that you can take steps in order to improve your score or fix any errors that you find. Do this at least a few months before you apply for the loan. Always remember, credit scores are the basic to get the personal loan, the good score you have a better rate of interest and tenure you will get. If you will ignore your credit score, there are chances you might pick a lender that’s a bad financial fit.
Evaluate your loan repaying ability
Checked everything, it’s time to assess your own ability to repay the loan. Before borrowing, get prepared for its repayment, check your income, then calculate all the expense and the added EMI. If you find your income is enough to repay the loan after considering all the other financial obligations and debt repayment, then only go for the personal loan to avoid financial confusion later.
A personal loan is specially designed for peoples who don’t want to go through the hassle of providing security and documentations. It is getting more and more popular among customers because of its easy availability, minimal documentation, zero security and can be used for any personal reasons. But still you should be careful and remember personal loan is not always recommended, and it can do more harm than good if you won’t be cautious while applying for it. Also, if you find out that the purchase you are going to make from the loan is more of a desire than need, it’s better to reconsider and delay the purchase than wasting money in paying high interests.