Finance

5 points to remember before applying for a personal loan

The requirement for funds can come up anytime, and getting a traditional loan can be time-consuming and cumbersome. That’s why there are personal loans, which you can fall back on when you need funds. Today, it is straightforward to apply for personal loan online. With speedy approvals and quick disbursement of funds, a personal loan is one of the best ways to get access to funds.

What is a personal loan?

A personal loan is an unsecured loan. This means if you apply for personal loan, you do not have to mortgage any particular asset. Getting an online personal loan through various lenders is easy. Private loans do not have any restrictions on end use, which means the funds can be used for business expenses or personal expenses, or both. This makes a personal loan a very flexible loan instrument to raise funds.

Following are the five points to remember before you apply for a personal loan :

1. Credit Score:
Personal loans are based on your credit score. If you want to apply for a personal loan, it is recommended to call the lenders and find out rates. If you keep sending loan applications, the lenders request for your credit score, and such repeated requests for credit score adversely impact it. The higher your credit score, the better the chances of getting an online personal loan.

2. Personal finances or Repayment capacity:
Check your finances prior to applying for a personal loan. In case you are not able to repay a personal loan, it impacts your credit score. If you already have multiple EMIs currently going on, it is better to postpone the decision to apply for a personal loan .

If your finances are in place and can repay the loans on time, it is better to take a personal loan that serves your need. If you apply for a higher loan amount than what you need, it may cause problems while repayment, especially in case of emergencies.

3. The rate of Interest and Loan Tenure:
Different lenders have varying rates of interest on personal loans. If you possess good credit score and robust repayment capability, you can negotiate with the lender on these parameters.

4. Prepayment charges:
When you acquire a personal loan, check the prepayment and foreclosure charges. Every lender has these charges. That’s why, if you are planning to prepay your online personal loan, it is better to check these charges.

5. Check eligibility:
Each lender has different eligibility criteria with regards to minimum income, assets owned, whether a person is salaried or self-employed. These factors determine the loan amount sanctioned, interest rate and tenure. Before applying, check your eligibility and EMI through calculators.

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