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Applying for a right personal loan may give you financial peace – be it a big-ticket purchase or a medical emergency. However, as a salaried individual, getting your application granted is itself a big deal. After all, the application process, from submitting to document verification, is huge. Your lender only approves the loan once they find you credible. Talking about credibility, certain things determine your credibility, such as:
You must remember a few things given the complexities involved in the personal loan application process. That's the topic of this post. Here, you'll learn about the 7 tips for choosing a right personal loan. Let's begin narrating them one by one in the following points.
A common mistake a first-time loan applicant makes is applying for a bigger amount. Chances are high that your lender would simply reject the application if you have a lower credit score.
Notably, at times, your application with a low CIBIL score may be approved but with a higher interest rate.
So, the first thing you must determine is how much you should borrow.
Thus, you need to evaluate the purpose for which you are applying for the loan.
People usually opt for instant personal loans in India for the following purposes:
So, decide how much loan you need to cover the expense. Then, you must calculate your EMI depending on your loan and the number of years for which you are taking the loan.
Notably, the loan interest is the amount you should pay (this excludes the loan amount).
The higher the interest, the more the EMI and vice-versa. So, calculating your interest rate while applying for a right personal loan becomes imperative. In general, the personal loan interest rate may range between ten and twenty percent based on different parameters.
Your credit score and income play a significant role here. Notably, longer loan tenure comes with a higher interest rate, while shorter ones have lower rates. Sometimes, lenders assess your employment status to offer a lower interest rate for people with higher incomes. So, you must compare interest rates before choosing the best deal from a lender or lending institute.
Your credit score says a lot about the borrower’s responsibilities. This three-digital figure may range from three hundred to nine hundred:
An application with a higher credit score can easily get their loan application approved depending on the amount. Each reliable NBFC in India or bank checks the borrower's score to give a better understanding of their repayment ability.
Evidently, your lender may check your credit report to understand whether you are a reliable applicant or not.
Opting for a personal loan with a low credit is possible. However, some lenders might ask for a co-applicant in such cases. Or you may need to strengthen your application by offering additional documents.
Repayment is paying the borrowed money back to the lending institute or lender. Ideally, loan repayment covers a part of the total principal. Note that principal here means the borrowed amount or interest charged by the lender.
Once you select the lender, you will find the repayment process mentioned in the loan agreement. It also includes the interest rate you need to pay back. You must study this section properly to understand your loan agreement.
Back then, people used to collect photocopies of their documents to opt for a personal loan. Cut to the modern era, applying for a personal loan without documents has become easy. So, if you want to opt for an instant loan without documents’ photocopies, all you need to do is submit the documents online.
Look for a lender that approves an instant loan without any documents. In such cases, you need to submit your KYC and upload the income documents. Lastly, wait for your documents to get approved.
For a salaried individual, repaying the EMI amount of a personal loan is an additional burden. Of course, you might have financial responsibilities for your family. So, before applying for a personal loan, you need to check your liabilities.
It helps you understand the total expense you need for each month. If you have any other existing debts, such as a home loan, car loan, or debt, you can calculate them to understand your liabilities. Once you understand your liabilities, you can better manage your debts.
Besides the interest rate, a personal loan might include additional charges. Some of them include the following:
So, it becomes imperative to understand the types of fees and assess them before choosing a loan.
Selecting a personal loan is a huge commitment. That’s where the above pointers help you make the right choice. You can spend time comparing different personal loans and understand each of them in detail. So, whether you want to apply for a travel or emergency loan, follow the above tips to make this process straightforward.
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Unifinz Capital India Limited is a Non Banking Finance Company (NBFC) registered with the Reserve Bank of India (RBI). lendingplate is the brand name under which the company conducts its lending operations and specialises in meeting customer’s instant financial needs.
