Getting A Personal Loan? Here Are Some Things To Keep In Mind Before Applying For One

Money borrowed from a bank, a non-banking financial company (NBFC), credit union or online lender and can be repaid in fixed monthly payments, is known as a personal loan. The rates of interest can differ depending on each institution. Any collaterals do not back most personal loans while a secured loan is usually supported by a house or car, which means that you will not lose the asset if you default. With a personal loan, as the name suggests, the loan amount can be used for any reason without letting the bank know what the loan is for.

Here are some things should know, before getting a personal loan:

Personal Loan Eligibility

Though the eligibility criteria differ from one financial institution to another, the general criteria include age, occupation, income, capacity to repay the loan in time, residence and other essential general information. Check your personal loan eligibility with the help of the personal loan EMI calculator. To avail a personal loan, the person applying must have a regular monthly income whether salaried or self-employed. The eligibility of a loan also depends on the credit history of the person.

Loan Duration

Typically, a loan can be given out for the duration of 1 – 5 years. In rare cases, the length of the tenure can be shortened or lengthened, but only with financial institutions that offer customisation.

Fees and Interest Rates

The interest rates vary widely from lender to lender and make a huge difference in how much the borrower needs to pay over the life of a loan. The interest rates for personal loans usually range between 5 to 36 percent depending on the lender and credit history.

Many lenders also charge a fee to cover the cost of the loan processing, and this usually ranges from 1 to 6 percent of the loan amount.

Like how all lenders charge a fin if the loan paid past the given date, some lenders also charge a pre-payment penalty as this means that they will lose out on the interest they would have otherwise earned.

Keep Your Options Open

It is a good idea to do adequate research on all potential financial institutions and compare what each one offers to see what suits you best. Make sure you have enough information on the key factors such as interest rate, loan tenure, processing fee, etc. before applying for a loan. Even when applying for a personal loan, be sure to apply to multiple institutions so you can pick as per your choice.

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