In recent years, personal loans have become pretty popular among people to help them fulfil their needs. A personal loan is an unsecured form of loan where a collateral is not required to be submitted. This type of loan can be used for many purposes starting all the way from education, medical, travel needs to marriage expenses. There are financial obstacles at every stage. There might occur instances where your accumulated savings are not enough, and that is the time when personal loans come into great use.
There are several things that you need to consider before borrowing a personal loan. Here are the few crucial points to help you avail a personal loan effectively:
Eligibility: The eligibility criteria differ from lender to lender. The financial institutions take into account many factors before determining your eligibility. However, the primary criterion is the loan repayment capability. Apart from this, there are several other things such as age, occupation, residence which are considered.
The Rate of Interest: The interest rate as mentioned earlier is one of the most crucial factors when borrowing a personal loan. Among financial institutions, the NBFCs are the ones who are providing the best interest rate. A rate of interest is instrumental when it comes to repayment of your personal loan, and thus, it has to be taken into consideration.
Loan Tenor: Most of the lenders including the NBFCs are offering personal loans for 1-5 years. It is important to know that a longer tenor will require you to pay smaller EMI but a higher loan amount in the long run and vice-versa.
Repayment Flexibility: As a personal loan borrower, it will be helpful if you get a fair idea about the principal payments at no cost. Until recently, there were prepayment charges involved. Thus, you were required to pay the charges. However, if you have a floating rate of interest, then you are not required to pay the charges. This is just one of the many aspects that you need to be updated with when it comes to repayment flexibility.
Loan Amount: When borrowing a loan amount, it is essential to plan the repayment beforehand. A loan amount that you borrow is directly related to your income. A loan amount depends upon your disposable income. If you have a high income, then there are chances of availing a higher loan amount. Furthermore, disposable income is one of the important factors in determining the loan amount. It is significant that you choose the right loan amount. A lower loan amount will not help you to fulfil your need whereas a higher amount will be pretty difficult to repay. So you need to strike a balance.
Fees and Additional Charges: Apart from interest charges that are applied by the financial institutions, there are several other charges too. These include processing fee, prepayment, etc. Most of the lenders charge up to 3% of the charges applied on the loan amount. These costs differ from lender to lender. It must be taken into due consideration before you choose your lender.
Don’t Keep on Wandering: It is important that you do not go overboard by applying for the loan from many lenders. Make sure to do your homework before you approach the financial institution.
These are a few points that you need to consider when you opt to borrow a personal loan. A fair knowledge about it will help you considerably in getting the best personal loan deal.