Pointers to Keep in Mind While Availing Personal Loan

January 13, 2022

Life is unpredictable, and you might need to meet financial obligations irrespective of the time. The veracity of such situations is you can’t prepare yourself ahead of time to deal with them. Although, if the situation is about fulfilling immediate financial obligations, count on a personal loan. However, the unsaid part is, you need to be highly vigilant before applying for a personal loan. Regardless of the fact that a personal loan is easy to avail and can be used for multiple purposes, you have to take care of certain pointers. So, here is what you need to know before applying for a personal loan to avoid later-stage hindrance and inconvenience. 

 Interest Rates Levied on Personal Loan

Interest rate is one of the most vital factors when it comes to availing of a personal loan. It is solely responsible for the monthly instalments and the overall interest component that the borrower pays off. 

Interest rates may vary from one bank to another. Additionally, a personal loan interest rate varies from borrower to borrower. The rate is computed based upon credit score, credit history, employment, and certain other factors. 

So, never choose any lender or financial bank outright. Explore a bit, know what different banks are offering, and based upon the investigation determine which one will be the best fit for you. 

Comparison helps you to avail a personal loan at the lowest interest rate. Well, a personal loan with a reasonable rate will make the repayment effortless, as you will not be burdened with exorbitant monthly payments. 

Personal Loan Tenure (Repayment)

When you borrow a personal loan, you have to repay the amount as monthly instalments within the specified time frame. That is why it is termed as loan repayment tenure.      

Throughout this tenure you will be repaying the borrowed amount, thus, make sure that you keep the tenure period short. The longer the repayment period, the more the repayment amount will be. Although, it has its own benefits too. When you go for a longer period your monthly EMI’s get mitigated. 

Make sure you are capable of paying the computed monthly instalments for a shorter tenure. Moreover, don’t overburden yourself with too many expenses. 

Personal Loan Processing Fee and Correlated Charges

The unsaid part about a personal loan is, you have to pay a specific amount for the processing of your personal loan and this amount is termed as a processing fee. Apart from the processing fees, other charges are also levied such as late fees, prepayment charges, and cancellation charges. 

Just ensure that this cost doesn’t go above 3% of the principal loan amount. Compare the applicable charges for various banks and finance providers before opting for the best provider to get a personal loan.

Processing fees and related charges are crucial factors to consider as you have to pay this amount upfront. You can either pay this amount yourself or can ask the lender to deduct this amount from the principal loan amount. 

Repayment Flexibility

Banks and other lenders offer various repayment schemes to the borrowers so that they can easily repay the personal loan amount. Although, one important thing you cannot escape from is, the longer the tenure, the more interest you will have to pay. Thus, make sure that you keep it as short as possible. Additionally, you can count on part-prepayment and foreclosure of a personal loan.

Remember, banks usually charge a fee for a personal loan foreclosure. If you don’t want to bear all such associated costs, go through the terms and conditions in advance while signing the loan agreement. Keeping aside the foreclosure charges, the best part is you have a flexible repayment option of paying it in one go or partially or as monthly installments. Just pay the related charges and close your loan then and there, rather than carrying the burden for years.     

Customer Service

 Availability of a loan at lower interest rates, flexible repayment tenure, lesser fees won’t make any sense if you have to deal with bad customer service. Imagine a situation, where you want to access specific information about your personal loan and even after spending days for the same, you don’t get the required information. 

Sounds daunting? Yes, it is. Always look for a finance provider who keeps customer convenience their utmost priority. Look for reviews about the bank, its specific branch you are applying in. It will help you to know how the bank handles its customers and are people really happy after borrowing loans and any other service from them.

Choose wisely, as you will have to deal with them for a long time until you repay the borrowed amount. 

Salary of the Loan Applicant

The salary of the loan applicant plays an important role in the loan approval, together with the repayment. When you apply for a loan, the lender counts on your salary to determine the amount of loan that can be sanctioned to you. Additionally, monthly income helps to determine how much you can repay as instalments after deducting all other expenses.

Based upon your monthly income possibilities, you are eligible for a lesser or more loan amount contrary to the required one. Never go for the amount you don’t need, as you have to repay it too. You will end up burdening yourself with a long-term repayment commitment for the amount you don’t even need. 

The Company You Work at

Another critical factor that no one usually looks into while applying for a personal loan is the venture you work for. While carrying forward the verification procedure, banks dig deep and accumulate information for the same. Your company status plays a key role in getting the approval of your loan.     

If banks find that the company had employees who defaulted in the repayment, then they consider such companies as a risk factor. It further results in the non-approval of a personal loan. Thus, you need to look into the company status and reviews specifically in terms of the bank in which you are thinking of applying for a personal loan. 

Employment History

Consistency is vital, no matter what we talk about. The same applies to a personal loan. During the evaluation of a personal loan application, lenders look into the applicant’s employment history. The focus is to find breaks in employment, job change, since when the applicant is working, and much more. Such pointers aid in determining the credibility of the applicant. Thus, a borrower needs to have a consistent employment history to get a personal loan with utmost ease in minimal time. 

Take Your Lifestyle into Account     

Here comes the factor which people usually neglect while looking for a personal loan. Looks new or seems to be a familiar one? Did not get your attention earlier? Right? Look into it now. How much you have to pay to live a desirable lifestyle helps in evaluating the amount you can keep aside to pay monthly instalments. 

Read Terms and Conditions Before Signing 

Remember the terms and conditions that you ignore while signing an agreement? Well,      it is indispensable to pay heed to them. It comprises certain highlights that can create an unnecessary fuss for you at later stages. Be a good reader and go through the terms and conditions. Be familiar with every minute detail mentioned within the terms and conditions section. 

No matter if you ever need them or not, knowing them is not going to harm you at all. Take some time to go through your loan agreement thoroughly and then sign the agreement. Never sign an agreement in haste.     

In a Nutshell

 Counting on a personal loan is an ideal choice if you take a loan for all the right reasons and not just for spending money on shopping. However, never shoot arrows in the air when it comes to acquiring a personal loan. Put forward thorough research and explore plenty of borrowing options. Know what various lenders have to offer and which suits you the best. Take into account the aforementioned factors to make loan approval an easy process for you. Use the borrowed amount for its intended purpose and further, it will help you fill the financial gaps without keeping your asset as a mortgage.      

FAQ’s

What is to be considered for a personal loan?

Before applying for a personal loan, you have to consider certain factors including personal loan interest rate, repayment tenure, type of interest rate, your monthly payment, credit score, and other expenses.

What are the important factors to consider when taking a loan?

Essential factors to consider while applying for a loan are interest rate, credit history, income, repayment capability, and loan tenure.

Why is it essential to consider factors in applying for a loan?

It is essential to consider certain factors before applying for a loan because it helps you to eliminate later-stage hurdles. Additionally, these factors help you out to attain a loan at lower interest rates. Considering such factors will help you safeguard yourself from penalty charges and other applicable charges.

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Category:Personal Loan

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