Personal loans are one of the most preferred types of financial loan products given the flexibility they offer. Borrowers can use these loans for any personal expense without even having to provide collateral to the lender.
Now, while this loan is an effective way of arranging for the required finances, it is also important to be aware of a few things before applying for one. Take a look at these five factors that a borrower should keep in mind before applying for a personal loan:
- Check the lender’s eligibility criteria
In some cases, borrowers face complications during the process of getting a personal loan. Often, this is because they are not aware of the lender’s eligibility criteria or documentation requirements. Do note that these requirements can differ from lender to lender based on each one’s terms. To ensure a smooth process, check with the lender regarding their eligibility criteria as well as the documents that need to be submitted beforehand.
- Keep an eye on the additional fees levied by the lender
A lot of borrowers share the common misconception that the only charge they pay for their loans is the interest rate. However, this is not true. Lenders can also levy other charges such as processing fees, late payment fees, prepayment fees, etc., which can increase the total cost of the loan. Make sure to consider these additional charges to understand the exact cost of applying for a personal loan.
- Maintain a decent credit score
Before giving any type of loan, financial institutions always check the applicant’s credit score. Most lenders prefer an applicant to maintain a credit score of 750 or more. It is quite common for applicants with good credit scores to get favourable loan terms such as a lower personal loan interest rate, flexible repayment tenure, or even a higher loan amount.
- Be particular while evaluating your needs
Before speaking to a lender about applying for a loan, you should first evaluate the exact expenses to understand the loan amount needed. It is never a good idea to apply for a loan amount which is in excess of what is required. This is to ensure that the loan is not unnecessarily expensive. You also need to make sure that the loan amount can be repaid comfortably and is within budget.
- Make sure to pick a suitable repayment plan
One of the most important things to keep in mind while applying for a personal loan is to make sure that you have picked a suitable repayment tenure. While some prefer a short-term repayment plan to save on the interest payments, some prefer a long repayment plan to make the Equated Monthly Instalment (EMI) payments easier. Ultimately, it is better to pick a repayment tenure that suits your budget. You can also use a personal loan EMI calculator to find a tenure that is convenient.
After going through the above-mentioned pointers, you can go ahead and apply for a personal loan online. Most reputed lenders offer instant in-principal approvals and sanction loans in as less as three seconds!