Personal loans are fine financial products. If you dream to do a home makeover personal loans are something you can heed to. If you need an old car running personal loans can come in handy. If you want to bring together a high-interest credit card debt, you’d want to take personal loans. Whatever may be your reason for taking a personal loan, do these 4 things before you apply for the same from an online loan app.
If you are planning to apply for a personal loan, make it easier by doing these 4 things:
- Know what you want
So say you are planning on redoing your basement. You’d love to have it all repaired and look beautiful and useful, but you know when you look inside that the job can wait a couple more years. Knowing what you want to do with your personal loan before applying for it is an excellent way to check whether today is the right time to take that loan.
Say for example, your ideal loan has an interest rate of 6% for five-year tenure. Look for a loan that comes close to your ideal loan. If you qualify only for an interest rate of 11% with a three-year term for your travel loan, you may wait for some more time.
- Compare different lenders
Even while applying with the best personal loan lenders, you might find loan offers that carry a difference of 6 percentage points or more in the interest rate. Thus, if you check with a bunch of lenders, you may get offers with interest rates ranging from 10% to 16%.
Now think, what if you hadn’t checked and applied only to the 16% interest rate lender? The interest rate highly changes your EMIs, so you must check for it with multiple lenders. That said there are other charges as well like origination fees, and service charges that you must check before taking a loan. You wouldn’t know about the interest rates out there in the market unless you apply to multiple lenders.
Most personal loan lenders allow pre-approved loans. With such offers, you can check your interest rates in a couple of minutes. A couple of hours spent on checking interest rates of different lenders could save you thousands of rupees.
- Check your credit report
Around 1 in every 5 Indians who check their credit reports, discover at least one mistake. And even a single mistake could take your credit score down. One thing is for sure, the higher your credit score, the better loan terms and interest rate you are likely to get offered.
Check your credit report, and if you find a mistake, submit a dispute to the authorized institution. Entities like credit bureaus can investigate the items in question and make corrections if required. This can improve your credit score and in turn, lower your interest rate.
- Understand essential personal loan concepts
Before you start with personal loan application and look out for travel loans on online loan apps, you must be familiar with a few concepts so that you are in a position to make the best decision whatever be your financial situation:
- Loan term: Your loan term is the duration you have to pay off the loan back. You would want to pay your loan as quickly as possible so that you can save money on interest. However, shorter loan terms mean bigger EMIs. You would not want to accept a loan with an EMI that you can’t afford. So, you have to hit the sweet spot there in selecting your loan term or tenure.
- Secured and unsecured loans: Most personal loans do not require any collateral and so they are known as unsecured loans. So, your lender can’t take your car or auction your home when you don’t pay the loan. But in the case your credit is poor you might not get qualified for taking an unsecured loan. So then, in order to get a loan, you might have to offer collateral like the money sitting in your savings account or gold or land to qualify for a secured loan.
- Origination fee: Although not very common, some lenders do charge an origination fee. It is typically a percentage of the total loan you are taking. Look for loans with minimal or no origination fee.
- Loan amount: Personal loans can range from Rs. 30,000 to Rs. 5,00,000. Take out only a loan that you require. Do not borrow more than what you need.
- Credit score and income requirements: Read each lender’s minimum income and credit score requirements to know whether you qualify or not for a loan before applying for the same.
- Interest rate: Arguably the most important feature to pay heed to is the interest rate at which you are getting your personal loan. It is the primary determinant of how much your loan will cost you over time. You want to get the lowest interest rate possible on your loan. Pay particular attention to other rates and charges like the origination charges.
- Prepayment penalty: It is a fee a lender charges you if you repay your loan before your loan term end. You must avoid loans with prepayment penalties as it is best to pay off your loan before your term ends when you have access to funds. Lenders may have a 6 to 8 months lock-in period after which you can prepay your loan at no extra cost.
Thus, getting a personal loan can be tremendously helpful to you. When you have taken the time out to understand it and position yourself as a qualified borrower, you can get the best offer for your personal loan.
Apply for Loans of upto ₹5 Lakhs easily using your phone or laptop, and pay back on low EMIs