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A personal loan is a convenient financial resource that you can turn to whenever you’re in a pinch. This unsecured loan is fairly easy to qualify for and obtain due to the fact that it does not require you to pledge any collateral. Some lenders even offer instant approval on personal loans and allow you to enjoy the full sanction within just 24 hours.
A major benefit of availing a personal loan is that the sanction has no spending constraints. The most common reasons to avail a personal loan are medical emergencies, social occasions, paying off credit card bills, repaying previous debts, funding vacation plans or purchasing dear goods including consumer durables. Whatever be your need for availing a personal loan, you need to meet the eligibility criteria of the lending institute, to be qualified for an offer.
Personal Loan Criteria
Before you start the application process, it is important that you shop for the ideal personal loan that fits your needs. Lenders include traditional banks and NBFCs, all of whom charge different interest rates. Keep in mind that with every personal loan application, your credit score takes a small hit. So, your loan application should be the final step. First, compare loans, contact lenders and seek all the necessary information.
Before settling on a loan, it is imperative that you check the fees apart from the interest rate. Depending on the lender, these may be high, and you may end up spending more than you intended to. So, don’t pick an option simply based on a low personal loan interest rate. Consider factors like processing fees, bounce charges, penal interest, and secure fees as well.
Depending on your needs, you may or may not know how much money you need in total. Choose a lender who offers a substantial loan amount that is sure to cover your expenses. You can also pick a lender who offers you more flexibility. Some lenders, such as Bajaj Finserv, offer a Flexi Personal Loan where you can withdraw the loan amount in parts, as and when you need funds. You only have to pay interest on the amount that you use and you can choose to pay EMI comprising only the interest. You can then repay the principal at the end of the tenor. This type of a loan is ideal for a home renovation, for example, wherein you have to make regular payments of varying sums to different service providers, and can’t be sure of how much money you actually need.
In case you wish to pay off your loan before the tenor ends, you need to pay a small fee for the same. However, some lenders are now offering better repayment flexibility, by providing free part and full repayment for personal loans. Try to keep the tenure as min as possible as that will save on the interest amount. The difference between same roi for 3 years loan to 5 years loan makes a lot of difference in net interest.
Borrowers tend to opt for a longer tenor to avail affordable EMIs as well as claim tax benefit on a personal loan. But bear in mind that the longer the tenor, the more interest you have to pay. So, it is advisable to choose a shorter tenor while ensuring the EMI stays well within your budget.
Before securing the loan, gets an idea regarding the EMI amount you will be paying as well as the loan tenor involved. Do not borrow more than what you can pay. Use a personal loan EMI calculator provided on your preferred lender’s website to estimate the instalments that will go out every month.
Lenders charge a processing fee of 2%–3%, exclusive of GST. This amount is deducted in from the loan amount that you are to receive. Find out what the lender is charging you to process your loan and then ascertain its affordability before applying for it. Check all the other associated charges too.
Loan documents are filled with jargons and a glossary of terms, which are difficult to comprehend. Take help from a financial adviser in case you need any assistance in understanding the terminology. Sign only when you are clear about each and everything mentioned in the document.
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