“Personal Loan”, as the name denotes this is used for personal purposes. It’s simple and easy to avail a personal loan. Today, everywhere be it TV, Radio, newspaper, hoarding, digital media – you can see the advertisements of a personal loan. Multiple banks and NBFCs are providing attractive offers on a personal loan. Still, there is a huge rejection rate? What is the reason? Why it is so? We have written this blog to make the consumers aware of essential things while applying for a personal loan.
Major things to keep in mind amid applying for a personal loan
Low Prepayment Fee
Sometime, you may take a personal loan to meet short-term financial needs, and the prepayment fee arises when the cash flow is in full swing, and in that case, the bank would like to hold you for the total interest rate. A prepayment fee is a financial tool used by the banks to make sure that the borrower should be in touch with the loan. If the prepayment fee is higher, then you will get a lesser loan amount than actual because the prepayment fee will be deducted from the loan amount. So, it is advised to move to such a lender who offers a low prepayment fee.
Take What You Want
There are many banks’ representatives who offer more than you need due to your financial stability, but you should overlook it and consider your need. For example, if your requirement is 5 lakhs to meet the short-term financial need and the lender is offering 7 lakhs due to your credit history, then you should stick on your needs rather than your eligibility.
Protect your CIBIL Score
Many lenders offer you to check the interest rate against the personal loan through CIBIL Score at free of cost, but performing the task repeatedly will affect your CIBIL Score, so try to avoid it and check the one who is trusted and is offering the personal loan at a minimal interest rate.
Analyze your Repayment Capability
Taking a loan is a difficult task, but repayment of the same is even more difficult. While applying for a personal loan you must focus on your repayment capability and you must figure out the loan amount which you can pay it back in an effective manner. Hence, calculate your monthly EMI as per the loan amount and this will help you to pay back the amount to the lender in a smoother way.
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Check Your Credit Score
Credit Score plays a crucial role in the financial market as it tells about your financial health. Banks usually offer personal loans at the lowest interest rate to those borrowers who have an excellent credit score. However, if a borrower has the worst credit score, then the bank denies offering a personal loan. So, before moving to the bank for a personal loan you must check your credit score.
Avoid additional services
Banks usually provide various services with the personal loan and it is not complimentary. But they will pitch for the same. For example, if you are taking a personal loan then they will offer the insurance plan and will say that it is free of cost, but nothing is free because the premium will be deducted from your monthly EMI. So, never get trapped in such schemes and always try to avoid the add-on services.
Never be in a hurry to choose a lender
There are various banks(SBI personal loan, Aditya Birla Personal Loan, etc) and NBFC who offers a personal loan at a low-interest rate, and sometime you may find the same on your email or in the text message, but you should avoid such messages and emails and should focus on the lender who is offering lots of benefits, a low-interest rate, no processing fee and more. If you find the same, then check all the details carefully, and amid applying for a personal loan, check all the columns properly.
Evade 0% EMI
Zero percent EMI is a quick trick accessed by the lender, and you will think that a personal loan is available at 0% EMI and you will quickly get into the trap. But the hidden agenda is something else and, in this scheme, you will have to pay a hefty processing fee and other hidden fees which will cross the actual interest rate of the market against a personal loan.
Choose lowest Foreclosure fee
The foreclosure fee is a prepayment penalty, which means early repayment of the loan amount before the fixed tenure. Banks get it’s earning from the interest rate charged against a personal loan, more the tenure more they will get the money.
So, if you repay your loan amount before the time period, then it will hamper their business, and this is the reason they charge for the prepayment penalty. Some lenders keep it low, and some keep it high and your job is to find out the lender who retains low foreclosure fee.
Check the hidden charges
The lenders provide a personal loan at various charges, some are described, and some remains were hidden. The costs include processing fees, interest rates, foreclosure fees, and these are mentioned in the personal loan brochure. But you must focus on the hidden costs such as penalty against the failure of EMI and more.
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Check the loan disbursement time
The availability of money on time will help you to fulfill your needs, so you must check the disbursement time offered by the lender, and if it takes too long then switch to another lender. Make sure to choose the one who disburses the loan amount in a quick span of time.
Check the loan process
It is always advised to go for the flexible method rather than the rigid one. So, amid applying for a loan check the loan process of the lender and if it simple and straightforward, then you can choose the same for a personal loan.
Hence, these were some of the points which you should consider amid applying for the loan as this will help you to pay back the loan amount in an efficient manner and will also help you to get the loan easily.
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