A personal loan is a great tool to help you move closer to your ambitions and financial needs. With so many digital platforms, getting a loan has become even more accessible. However, before you apply, you must consider key factors to ensure you get a personal loan that matches your needs.
Even if you're new to managing your finances or have been doing it for years, considering these 7 factors is a must before applying for a personal loan. Knowing them will help you avoid potential pitfalls and make the loan application process a lot more seamless.
An interest rate is the amount a lender charges for borrowing money, which can vary across financial institutions. It plays an important role in determining the total cost of your loan, so make sure you compare multiple personal loan interest rates from different loan providers before finalising the right one.
Always check if the interest rate is fixed or floating. A fixed interest rate usually remains consistent throughout the loan term. On the other hand, a floating interest rate may fluctuate based on market conditions. Verifying and comparing it with different options can help you find the best loan offer.
Your credit score and credit history are two crucial things lenders check to ascertain your creditworthiness. A good credit score closer to 900 assures the lender of a reliable borrower, helping them get a lower interest rate.
Paying bills on time, minimising outstanding debt, and avoiding multiple loan applications are ways to improve your credit score. These actions help maintain a positive credit report and increase your chances of obtaining favourable loan conditions. Know more about on how does a personal loan affects your credit score.
Personal loans are associated with various charges that you, as a borrower, need to be well aware of. These personal loan charges could include processing fees, prepayment charges, and late payment penalties.
Some lenders might also hide certain charges in the fine print, making them easy to overlook, so make sure you read all the documents carefully before signing the papers. Additionally, consider the total cost of the loan and not just the EMIs to make a financially sound decision. Get to know more about various personal loan charges on our blog.
Before applying for a personal loan, you must assess your financial needs accurately. Borrowing more than necessary can result in higher monthly repayments and financial burdens. On the other hand, borrowing too little may not cover your expenses.
Choosing a suitable loan tenure is equally important as it directly impacts your monthly repayments. Longer loan tenures reduce your monthly EMI costs but increase the total interest on your payments. Conversely, a shorter tenure raises your EMI costs yet decreases the total interest outlay.
Personal loan scams and fraudulent practices are far too common in today's digitally expanding world. So, when considering a personal loan, thoroughly research and verify your loan provider's reputation.
There are lenders in the market that offer fraudulent schemes, luring you at surprisingly lower interest rates and various hidden charges. Thus, reading the fine print carefully and seeking clarification from your lender whenever necessary can help avoid any scams or misunderstandings that could result in financial troubles later on.
Before taking a personal loan, evaluating your repayment capacity is important. Assess your monthly income, current financial obligations, and expenses to ensure you can manage the loan's monthly instalments.
You can use online EMI calculators to estimate your EMI and see if it fits comfortably within your budget. Overestimating your repayment capacity can lead to severe financial stress and potential defaults, which could negatively affect your credit score.
Desperate times often strike without warning, catching you off guard. Facing a financial crisis while still repaying a personal loan can be challenging. Fortunately, some financial institutions offer a deferment period, commonly known as forbearance.
As a borrower, forbearance allows you to postpone loan repayments temporarily. However, it's crucial to understand the various terms and conditions associated with this option, as it may incur additional charges, ultimately increasing the total loan cost. Consider this option carefully and use it only during emergencies to avoid negative repercussions.
When applying for a personal loan, paying attention to details beyond the loan amount is crucial to securing the right loan. Being mindful of these 7 key factors can help you get a personal loan that best suits your needs on favourable terms.
Addressing such concerns, Quid provides complete transparency and RBI-approved lending partners offering the best personal loans in India. So, remember these important factors and avail yourself of a personal loan with Quid to be a step closer to your dreams.
Getting a personal loan with a low credit score may be difficult, as most lenders require a minimum credit score of 750 for loan approval. However, some lenders may consider a lower credit score and give you a personal loan with a higher interest rate, or you can opt for a secured loan.
The time taken to approve a personal loan varies from lender to lender. Generally, online applications are processed within two to three working days. Whereas, if you apply for a personal loan through a bank, it takes at least a few days to a week to get the approval.
Yes, you can prepay or foreclose the loan before its tenure ends. However, certain lenders may charge a prepayment or foreclosure penalty for an early repayment.
Yes, you can use a personal loan for debt consolidation and pay off your other debts, such as credit card dues. It can help to potentially reduce the overall interest on all debts.
The interest rate on a personal loan typically varies between 10.75% p.a. - 24.00% p.a., depending on your lender, credit score, and loan amount. It's essential to compare interest rates from different financial institutions before finalising a personal loan.
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