What Should You Ask Before Applying for a Personal Loan?

Are you looking to get a loan to meet your financial obligations? A personal loan might be the ideal loan option for you, as it requires minimal documentation. A personal loan can be used for any purpose, which is one of the largest benefits of personal loans.

Many lenders offer instant personal loans. However, you must exercise caution when selecting a lender. There are a few things that you should consider before you apply for a personal loan. This article will discuss the points you need to know and the questions you should ask before applying for a personal loan. 

Questions to ask when applying for a personal loan

Before you apply for a personal loan, it is necessary to ask yourself these questions. Answering these questions will help you determine the right personal loan amount and lender.

Why are you applying for a loan?

Consider why you are applying for a loan before you apply. When you avail yourself of a personal loan, the lender is not concerned about how the loan amount is used. Thus, the loan can be used for any expense you have or need to meet. Most people apply for two reasons:

• You are applying to build your credit history. Applying for a loan when you have the capital to repay it allows you to build a good credit history.
• You are applying for a loan to cover a specific expense not covered by other loans, such as a home renovation loan, a medical loan, a home loan, etc. 

Do you need the money urgently?

The lender you choose is also determined by the urgency.One can select a lender with a simple approval process if one needs the money for an immediate expense. Instant personal loans have a fast processing time, and money may be sanctioned to your account as soon as the lender approves your loan. It will help you meet any urgent financial needs without much hassle. 

How much money do you need?

You have to determine the amount you need before applying for a personal loan from a lender you know. First, determine what you need the loan for, and then, based on this, calculate how much you need to borrow.

What are the tenure and rate of interest of the loan?

Before taking a personal loan, these two points cannot be ignored. The interest rate for a personal loan will be decided based on your credit score, loan tenure, and principal amount. Your EMI payments depend on your interest rate, principal amount, and loan tenure.

The lender may offer you a good and flexible loan tenure, and it will give you enough time to repay your loan with interest. It will help reduce the burden compared to any other loan with a non-flexible tenure. Furthermore, you can choose a loan tenure that best suits your needs and financial stability. Most lenders are ready to offer a tenure of up to 60 months. The tenure and rate of interest you are offered will vary depending on many factors, including your loan history, repayment capacity, income, age, etc. You can compare loans to determine which one suits you best.

Do I need to provide collateral?

Many lenders do not require you to provide security to get a personal loan. In other words, your loan may be unsecured. However, you will need to provide collateral if you do not have a salary slip or other required documents. Further, if the lender thinks you cannot fulfill the repayment conditions, you may be asked to provide collateral.

What are the repayment options? And will you be able to afford the EMI?

Choose a repayment option that suits you best. It may not be a wise decision to spend all your monthly income trying to repay your loan. Therefore, before applying for a loan, consider whether you can afford the EMI and whether your preferred payment option is available. Calculate how much EMI you can afford before you visit a lender, so you can determine whether a loan is out of your budget.

Consider the impact of a new loan on your credit score. Timely repayments may improve your credit score. In contrast, delays in EMI repayments will lower your credit score. Hence, you should consider your repayment capacity first so that your credit score is not negatively affected if you borrow outside your capacity. 

Do you have a good credit score for a personal loan?

Since a personal loan may not require you to provide collateral security, your credit score will be a deciding factor. Most lenders require a good credit score. They may offer a comparatively higher interest rate if the credit score is poor. Check your credit score before you apply for a loan.

Where do you want the money disbursed?

If you are applying for a personal loan to pay off existing debt, you may want the money transferred directly to the creditors’ accounts. Alternatively, if you borrow money for many short-term expenses such as home renovations, fees, bills, etc., you will want the money in your account. The account in which the money needs to be disbursed depends on the purpose of the loan.

These are only some questions to ask when applying for a personal loan.

Conclusion

There is no defined set of qualifications that will ensure the personal loan application is approved. However, certain things can be kept in mind while applying for one. The questions above highlight what you should determine before approaching a lending institution. If you have answered all the questions, you can apply for a personal loan with Piramal Finance today! You can also visit Piramal Finance to read more informative articles on personal loans.