Being aware of the world of personal finance before applying for a loan not only improves your chances of obtaining approvals, but also protects you from risks related to default and hidden charges. Personal loans are easy to obtain and widely available today, yet there may be many things that one may ignore while applying.
When you approach a lender for a personal loan, it is important to consider a few things before you make your final decision. These include your credit score, the interest rate at which your personal loan will be approved, the fees and charges associated with it, and so on and so forth. Taking care of these factors is likely to ensure approval and help you get money on favorable terms. Conversely, ignoring these factors can lead to huge mistakes such as selecting the wrong lender or getting stuck with a loan on unfavorable terms.
Here are some important things you need to keep in mind before you apply for a personal loan with any lender via personal loan app.
Understand the personal loan EMI you are likely to afford
Personal loans are unsecured loans and therefore the interest charged is higher than other loans. Online personal loan starts at around 10.99 per cent per year depending on your profile.
The interest rate is one of the key factors that determine your EMI. And to get a rough idea of your EMI, you need to use an EMI personal loan calculator. This will give you an idea of your estimated EMI and help you decide whether or not to have a personal loan of that amount. Calculating your EMI will also help you plan your budget and finances accordingly.
For instance, you borrow a personal loan of 5 lakh at an interest rate of 15% per year for a period of 3 years. The effective EMI for this loan is probably Rs. 17,333, which you can easily calculate using an online EMI calculator. Then you can analyze whether or not you can pay that much a month. If not, you can reduce the amount of your loan or apply for a longer period of tenor, say 4 or 5 years.
Knowing your EMI before applying for this loan can make things easier for you. You know the total cost of your borrowing, and you can plan your finances on that basis.
Compare lenders for eligibility and loan terms
Different lenders offer different rates for personal loans and guarantee that they offer personal loans at the lowest possible rate. Therefore, you need to analyze the rates offered by different banks and NBFCs. You can go through the portals of the different lenders and check the rates. Once you compare different lenders for rates, fees, charges and other loan terms, you can go ahead and apply with the one you prefer the most.
This way, you can choose the best personal loan offerings at minimal cost of financing.
Borrow only as per your need
When you are eligible for a personal loan, lenders may offer you high-quality advances at attractive financing costs. But you shouldn’t lose control just because you can get more money. Instead, you should borrow only as much money as you need. When larger loan amounts are being offered to you, it may seem tempting. But repaying a huge amount of money may be a pain for you in the long run. So first, analyze your needs, understand your budget and then apply for the personal loan.
Check your CIBIL score before you apply for a personal loan
Banks, NBFCs, and other lenders consider your CIBIL score while approving your loan. A low CIBIL rating may lead to your application being rejected. In the event that your loan application is approved at a low CIBIL score, chances are that the interest rate charged is higher. So, before you apply for a loan, try to check your CIBIL score. Doing this will give you an idea of whether or not your application for a loan will be approved.
If your CIBIL is low, try taking action to boost it and apply for a loan. (Using a credit card properly and taking a small amount of personal credit for a short period of time can boost your credit score).
Other fees and charges
There are different costs associated with your personal loan, including processing fees, GST and others. All of these together contribute to your total borrowing cost, so don't forget to add it to your cost. You should also be aware of the prepayment charges and penalties for late payment.
Foreclosure is also one of the important things you should consider before applying for a personal loan. And yet another thing you need to consider is the balance transfer facility. Always try to go with the lender who is offering you these facilities, as they may not affect you at present, but in the future they will certainly affect you.
It's generally easy to get approved for an instant personal loan. The loan will be quick and disbursed within 24 hours. However, in order to be approved, it is important to know its eligibility criteria and other things related to it.
If you are looking to get financing from the safety and comfort of your home, consider getting a personal loan using the Bajaj Finserv Personal Loan App – Experia. You can apply for a personal loan in minutes and get approval in a jiffy.