5 Important Things to Know Before Taking a Personal Loan

Personal loans are important and help make dreams come true; don’t turn them into a burden. Choose wisely and keep all these things in mind while signing up for a loan.

In today’s world, personal loans have become the most popular and, we can say, common financial products that are availed by the borrower in the market at times of financial need.

Personal loans might not be opted for by the elite class of society, but they are quite popular among middle-class or lower-class people. Also, it is important to know that in times when there are limited financial resources and a single person earning in the family, everyone can’t build their dream house or buy the car that their children have always desired.

To apply for a personal loan, one must have a good credit score, which should be 750 or above.

To make their dreams of building a house, buying a car, or starting a new business come true, personal loans are available in the market that one can always take as per his/her financial capabilities and repay to the bank or any other financial institution in regular intervals. There are various types of personal loans available in the market depending on your needs.

Features of a Personal Loan

• Quick personal loan approval
• Online documentation process
• Easy repayment
• Flexible tenure
• Attractive interest rates

Some of the most common reasons to apply for a personal loan

• Personal loan for home improvement
• Personal loan for a wedding
• Personal loan for education
• Personal loan for medical emergencies

Personal loan eligibility criteria

• Must be between the ages of 18 and 21
• Must be a resident of India
• Must have a valid KYC document
• Working experience of at least 6 months
• Minimum CIBIL score of 750

Benefits of a Personal Loan

The personal loan is hassle-free, versatile, easy to apply for, and available with a click of the mouse. Be it a big-ticket purchase or a small-ticket purchase, apply anywhere, anytime. Being unsecured, all that is needed is a good credit score, and there is no need to share any collateral.

But before taking one, one must keep a few things in mind, as they will help in getting a personal loan at the best interest rates.

Loan amount:

Before signing up for a personal loan, one must be sure about the loan amount. What is the requirement, how much money is needed and is someone in a position to repay that loan easily without any default? The less one borrows, the easier it is for the applicant to repay the loan. As a result, whenever anyone decides to take out a personal loan, make sure the loan amount does not exceed the borrower’s ability to repay.

Interest Rate:

The interest rate is something that financial institutions charge on loans they make. Thus, the interest rates on any personal loan define how much time it will take to be repaid. The higher the interest rate, the longer it takes for the person to pay back the loan. Any person who wishes to take a personal loan must do his/her research in the market to get the best or lowest interest rates for their loans. The higher the credit score, the better the interest rate.

 EMI:

EMI plays a very important role when deciding on personal loans. EMI refers to the amount that one needs to repay to the lender every month. It consists of a portion of the principal amount as well as the interest amount. The higher the EMI, the faster the loan repayment will be. The lower the EMI, the longer the loan will take to repay and the higher the interest rate. Also, it is very important to understand that missing even a single EMI payment can have a very bad effect on the credit score. So before selecting any loan, make sure that EMIs are properly formed as per the repayment plan.

The credibility of the lender:

If taking a personal loan is important, then checking on the borrower’s credibility is more important. One cannot afford to take loans from incredible sources. A lender’s credibility in the market is very important for the borrower too, as it will impact the smooth repayment of the personal loan. Earlier, one use to take loans from banks only but today many options are available in the market to take a loan. Apart from the banks, there are financial institutions and people who are providing loans in the market. So before choosing any option to take a loan from, make sure it is credible, known by everyone, and has a good reputation in the market.

Credit Score

Before applying for a personal loan, make sure you have a good credit score. As lenders always go through the credit report before giving any approval. Any score of 750, or above offers the best chance of getting a personal loan at the most attractive interest rate. It gives the loan applicant an upper hand in terms of negotiating the interest rate and loan amount.

Bottom line

Taking into consideration all these factors, the applicant will get the best loan offer in terms of interest rates. Aside from that, it keeps the applicant from choosing the wrong lender, time period, or high-interest rates.

These are some of the key takeaways that one must keep in mind before applying for a personal loan. Also, it is very important to choose a personal loan that works as per your requirements and is affordable. Never go for what is popular in the market, but always choose wisely from the most credible sources. Personal loans are important and help make dreams come true, so, don’t turn them into a burden. Choose wisely and keep all these things in mind while signing up for the loan.