Things to Remember Before You Get A Personal Loan
A personal loan is one of the most popular loans available today. The features of this loan make it extremely in demand and many people opt for these loans to meet their fund requirements. With digital banking and technological developments, lenders have started online personal loan offerings.
If you are wondering how to get a personal loan, you just need to apply online through the lender’s website. Applying for a personal loan is extremely simple and your bank may even preapprove you for a loan up to an amount.
However, before you opt for a personal loan, there are a few things you need to remember. Once you consider these factors, you will be able to best make your personal loan application.
Following are the things to remember:
- Unconditional and unsecured:
A personal loan is unconditional. This means except for a few negative uses of funds such as for illegal activities or for criminal activities, the lender does not put any conditions on the use of funds. This means the funds can be used for any purpose, home improvement, medical emergencies, wedding expenses, travel expenses. This make it a very flexible loan to opt for. Along with this, an online personal loan is unsecured. This means that the borrower does not need to put up any security for the loan. Since no security is needed for this type of loan, other factors become very important.
- Loan amount:
Lenders do online pre-approval for a loan amount. However, the actual amount of loan approval depends on the actual income of the loan applicant. The monthly income, the existing outstanding loans make a big difference on the loan amount. Most lenders have their eligibility criteria displayed clearly on their websites. If you do not have a lot of disposable income after paying off existing loans, consider making a joint loan application.
- Depends on credit score:
Your credit score is an indicator of your repayment ability. It is very important when you apply for a personal loan. You can check your credit score on the CIBIL website and ask for a detailed credit report to ensure that the transactions have been reported right. However, if you don’t have a high credit score, it can impact the loan amount you are eligible for or the lender may approve your loan application but charge a higher rate of interest. The personal loan rate of interest also depends on your repayment ability.
- Choose the right loan tenure:
The loan tenure has an impact on the EMI amount and the total interest paid. When you choose a longer loan tenure, the instalment amount reduces. However, in such a case, the total interest paid is quite a large sum. On the other hand, a shorter loan tenure can lead to high EMIs which are difficult to service.
- Check the EMI and other costs:
You can use a free personal loan EMI calculator to find out the monthly instalment amount. This tool is available for free on the lender’s website. You can use this tool to help you plan your instalments.
Apart from the personal loan rate of interest, there are other costs such as loan pre-payment fees, loan processing fees etc. These fees increase the cost of the loan. They are available on the lender’s website and must be considered before you make a loan application.