Factors to Remember When Applying for a Personal Loan

Life is not always a smooth sailing ship. It may bring unexpected expenses at times that require immediate financial support, like covering urgent medical bills to renovating your home. In such a situation, applying for an instant personal loan online would be a good idea.

Personal loans are a widely popular financial option that can help you meet multiple needs. This unsecured loan can be used for almost any purpose, starting from medical bills and education expenses to home improvements and weddings.  Unlike secured loans, personal loans do not require collateral. 

• One of the biggest benefits of personal loans is their flexibility. You can use money from a personal loan to renovate your home, pay unexpected medical bills, fund a family holiday and more. As opposed to specific-purpose loans such as auto loans or home loans, which are tied to particular purchases or uses, personal loans provide you with the freedom to allocate the funds as you see fit.
• Secured loans would require you to offer assets like property, a vehicle or gold as collateral. However, being an unsecured loan, personal loans do not need any such security. This makes personal loans ideal for people who may not own any major assets. The nature of these loans opens up borrowing opportunities to a broader segment of the population, including young professionals who may lack valuable collateral.
• Personal loans are processed and disbursed quite fast. In fact, apply for an instant personal loan online today and have the money disbursed within just a few days. This makes personal loans ideal for urgent financial situations, like paying off college fees within a deadline.

There are many banks and non-banking financial companies (NBFCs) in India through which you can avail of personal loans. All of these lenders offer varying personal loan interest rates, tenures, and other terms and conditions. You must do your research and carefully evaluate all aspects associated with the loan before making any decision.

Interest Rates

Personal loan interest rates are among the most important factors you need to keep in mind. Diverse financial institutions typically offer varied interest rates. You need to compare these rates and try to identify the lenders that offer personal loans at the most competitive interest rates. Lower interest rates would imply lower interest payments and may help you to enjoy considerable cost savings over the long term.

Loan Amount

The loan amount is basically the sum of money you borrow as a personal loan. The personal loan amount you would be eligible for shall depend on your repayment capacity. This repayment capacity is primarily assessed by lenders based on factors like your income, existing debts, and credit score.

Loan Tenure

The loan tenure is the period of time within which you have to repay the loan. The loan tenure you select would largely rely on your financial feasibility. A longer tenure would result in lower EMIs, but incur higher expenses as interest payments. On the other hand, a short tenure may have higher EMIs, but it would allow you to save on interest. Basically, you need to assess the sum of money you can actually pay as EMI each month, and select the tenure according to its terms.

Processing Fee and Prepayment Charges

Lending institutions are likely to charge processing fees for processing your loan application. Processing fees would depend on the financial institution. Many lenders also have prepayment charges for personal loans. This refers to the fees imposed by the lender in case you repay your loan before the end of the term. You must be clear about the prepayment charges involved before applying for an instant personal loan online.

Repayment Schedule

The repayment schedule would define how exactly you will be paying back your loan. Varied lenders provide distinctive repayment plans. Therefore, you should do your research and compare these plans in order to identify lenders providing a repayment schedule that meets your specific requirements.

Credit Score

Your credit score plays an important role in evaluating your personal loan eligibility. Lenders are more likely to grant personal loans to borrowers with a high credit score. They are likely to be approved for a higher loan amount as well.  If your credit score is low, you must take steps to improve it before applying for a personal loan.

Responsibly managing and paying off a personal loan can have long-term benefits for your financial profile and credit score. Paying off personal loan EMIs in a timely and consistent manner would have a positive impact on your credit history, which is a crucial component of a credit score. A higher credit score can considerably improve your eligibility for future loans. It may enable you to avail of loans at more favorable terms, such as lower interest rates and increased loan amounts. Basically, availing and managing a personal loan efficiently can serve as a stepping stone toward stronger financial credibility and allow you to access to better credit opportunities down the line.