Tough times can drain a person both mentally and financially. Having a financial backup is always recommended for unforeseen circumstances. However, many of us might not have a fat saving account. In this case, a personal loan can be your best friend. The global COIVD-19 pandemic has shown us how unpredictable the world can be. Many a time, no matter how well we plan our expenses, certain emergencies can drain us financially. The good thing is numerous financial institutions are ready to offer a loan. However, certain eligibility requirements help these institutions to weed out bad debtors. Read on to know more about personal loans and how you can opt for one.
Understanding the Basics of a Personal Loan
A personal loan can be explained as a financial tool that allows people to borrow money from a lender at the current personal loan interest rate. The duration of this loan can vary, depending on the requirements of the borrower and the lender’s policy. Usually, the loan tenure is in the range of 12 to 60 months. The total principal and interest amount are calculated for computing the aggregate amount which the borrower has to repay. This is divided into monthly EMIs as per the suitability of the borrower. The EMI amount can vary depending on the total loan tenure.
There are two important features of a personal loan that make it a lucrative option for borrowers. The first one is the unsecured nature of this loan. Most personal loans are unsecured, meaning that the borrower doesn’t have to submit collateral or security to borrow the loan amount from the lender. The second important feature is the flexibility offered by a personal loan. The borrower is free to use the loan amount borrowed as per his requirements. There is no restriction put in place that limits them to using funds for a specific purpose.
Important Tips for your First Personal Loan
If you have never applied for a personal loan, you might not be fully aware of its features and benefits. Here are some important tips to be mindful of when it comes to applying for your first loan.
- Check your Eligibility
The first thing that should be on your checklist when it comes to a personal loan application is the eligibility requirements. Most lenders follow a set of eligibility criteria that help them minimize their risk by lending money to credible customers. The first eligibility criteria that you should check out for is the age range. Most of them offer personal loans to applicants in the age range of 21 to 60 years. The second most important requirement is your income proof, check for the minimum monthly income criteria set by the lender.
- Choose the Loan Amount
Choosing the right loan amount requires meticulous planning. You need to evaluate your expenses and other requirements before finalizing an amount. Borrowing more than your need will not only add to interest costs but will also increase your monthly EMIs. You must choose a loan amount that you are comfortable repaying. A higher loan amount is not necessarily in your best interest since you are paying interest on the same. However, you must not choose a very low amount, which makes it hard for you to manage your expenses.
- Find the Lowest Interest Rate
You must always compare different loan products offered by reputed financial institutions before opting for one. Always choose a loan product that has a lower interest rate. Finding the lowest interest rate is like getting a discount on your loan. You can check for reputed lending parties such as Fullerton India, which offers personal loan starting from an 11.99% interest rate. It is easy to check the current personal loan interest rates online.
- Look for Prepayment and Processing Fees
Besides the interest rate, also check for the processing fee that is hidden so that you know the actual amount you will be repaid. The processing fee is usually a very nominal percentage of your total loan amount which is added to your dues. In addition to this, you must always check for the prepayment charges associated with your loan product. In case you choose to repay the entire amount before the loan tenure, prepayment charges can be levied.
- Check your Credit Score
Regardless of the type of loan product, you are going to choose, you must check your credit score beforehand. A good credit score (over 750) can help you get better deals as it establishes high creditworthiness. You must maintain a credit score of over 750 for quick processing and disbursement of loans.