Personal loans have revolutionised the borrowing-lending behaviours of households, with more and more people depending on organised borrowing to meet their funding needs. These advances are dedicatedly designed to help borrowers fulfil their financing requirements while keeping the funding affordable. Several other borrower-friendly terms have made a personal loan the go-to option for many. These loans come with attractive rates and features, that make them easy to manage as well for the borrower.
When availing a personal advance, one would need to keep a few crucial things in mind. Doing so should help plan your funding better so that you manage your loan efficiently while ensuring maximised benefits from the financing option. Below given are some crucial aspects to keep in mind when availing a personal loan.
Essential Factors to Know Before Availing a Personal Loan
Rate of interest
When it comes to personal advances, the importance of interest rate can’t be ignored. As unsecured advances, personal loans often come under close scrutiny as many believe that they attract high rates. However, the truth behind it is that such loans are high-risk lending avenues for financial institutions, which is covered with a high interest rate only if the applicant’s borrowing profile does not hold the necessary merit. Thus, if you qualify all eligibility requirements and portray necessary financial discipline, your chances of receiving a personal loan at low rates of interest increase. You must also compare among lenders to find the most affordable loan option for you.
As high-value advances, personal credits also require extended terms for convenient repayment of the loans. You must thus make sure to check how many years are available as the repayment period with this advance. With some of the best lending institutions in the market, the tenure can go as long as 5 years, which eases loan affordability for many.
Personal loan repayments are often accepted in EMIs that comprise a computed amount as a factor of the loan amount, tenure, and interest rate applicable. Hence, while the rates are fixed by the lender, your choice of the loan amount and tenure impacts the EMIs you end up paying for your loan. To ensure affordability, you must calculate the EMIs payable before finalising the loan amount to avail and the tenure for repayment.
Total interest and total liability payable
Along with the EMIs, a prospective borrower must also consider how much he/she would be paying. As total interest on the loan as well as the final loan liability owed to the lender. One can check these details with the help of a personal loan interest calculator. These are accurate self-help tools and ensure quick computation.
Making these assessments beforehand allows one to make wise borrowing decision and helps with easy loan repayment.
Importance of credit score
As these are unsecured advances, one needs to hold a high credit score of at least 700 to qualify for a personal loan. Before applying, you must thus check your credit score and work on your financial profile to improve it.
Credit score is a 3-digit number calculated on the basis of one’s credit history. And the record of previous borrowings as well as repayments. One can take a few necessary steps to work on its improvement, such as timely repayment of advances. Availing a balanced credit mix, maintaining a credit utilisation of not more than 30%, and the likes.
Before applying for the advance, you must also be well aware of the eligibility factors. That impact your chances of availing financing. Lenders keep a strict eligibility norm that must be met to secure the advance. The common factors that determine your eligibility for a personal loan include the one’s age, monthly income, occupational status, financial eligibility, and residential status.
Loan amount and maximum loan availability
Before applying for your advance, makes sure to check how much loan based on the maximum financing your lender provides. Further, based on this, you can also check your individual loan availability with a help of financial tools like eligibility calculator.
Once you have determined the loan amount, tenure. And other related details about your personal loan, you can proceed to apply for the advance. Keep all necessary documents ready before applying so the application process is completed smoothly.