It is important to have all pertinent information before applying for a personal loan. It improves the chances of your loan being approved but can also help you secure a lower interest rate on a personal loan. Here are some vital things you need to keep in mind before applying for a personal loan.
While applying for a personal loan, you must consider factors like your credit score, interest rate, and other charges. Examining these criteria ensures that you decide what works best for you. It also prevents you from making mistakes such as selecting the wrong lender, opting for an inconvenient tenor, or borrowing more than you need.
So, take the time to examine these six aspects before applying for a personal loan:
1. Maintain a good credit history
A credit score or the CIBIL score represents your creditworthiness based on your history of credit repayment. The CIBIL score ranges from 300-900, and a score above 685 or higher is considered ideal. A lower credit score signifies bad debt management and may result in your loan application being rejected or a higher interest rate being applied on your loan.
You can maintain a good credit score by simply paying your dues on time. A good way of ensuring this is by automating your payments. Another important way of doing this is by reducing the number of credit cards used and ensuring that you continue to use your old credit card with a good credit history. It is also important that you never exceed more than 30% of credit utilisation.
2. Compare the interest rates in the market
Comparing the interest rates offered by various lenders ensures that you get the lowest rate. You can easily compare the rates offered by different financial institutions on platforms such as Paisabazaar, BankBazaar, and MyLoanCare.
This enables you to select personal loan finance at the lowest interest rate and a type of interest that is best for you, making the repayment of EMI on your loan easier.
3. Assess all costs
There can be numerous costs like processing, prepayment, and late payment fees when borrowing a loan. Before applying for a loan, consider the various fees your lender charges to get a clear estimate of the expenditure. This can help you manage your finances better and help you decide whether the loan is affordable.
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4. Consider your needs to choose the right loan amount
Make a list of all your needs and requirements, and then prioritise which of the needs you are going to finance with a loan. Some everyday purposes for taking a personal loan are buying a vehicle, financing a wedding, addressing a medical emergency, or planning a holiday. Based on the prices and expenses associated with your needs, you can decide what you need to borrow. If your monetary needs are unpredictable, consider opting for a Flexi personal loan.
5. Evaluate your ability to repay the loan
Before borrowing a loan, prepare for its repayment. You can do this by routing income from investments towards EMI payments. But you should also ensure that your income is enough to repay the loan. For this, you can use Personal Loan Calculator to estimate your monthly EMI well in advance and plan your repayment accordingly. You should also consider other financial obligations and debt repayment before borrowing a loan to avoid financial confusion later.
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6. Avoid falling for gimmicky offers and plans
There are lenders across the market that offer artificially low-interest rates or gimmicky schemes. When you check the fine print, these loans often turn out to be more expensive than expected. Also, at times, they are based on floating rates of interest. This makes the interest rate appear low initially but, as time passes, it can increase substantially.
Some providers also bury costs and charges in paperwork. Find a lender who is transparent for the best personal loan experience. Bajaj Finserv offers personal loans up to Rs. 40 lakh at attractive interest rates. Share your basic details to check your personal loan pre-approved offer and avail of the financing you need with India's fastest personal loan.
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