If you are planning to take a personal loan, it is important that you keep a few aspects in mind before you start with your application process. You must also note that personal loans offer you funds at a much higher interest rate as compared to other loans available in the market. Let us have a look at 6 most important factors to keep in mind before taking a personal loan.
6 key factors to consider before applying for a personal loan
Understand your credit report: Credit score plays a major role in the personal loan approval process. Before you apply for a personal loan, you should cross check your credit score to avoid any discrepancies and fix it if needed. A low score will be likely rejected which in turn may harm your credit score adversely.
Compare lenders: Personal loans are offered by various NBFCs and banks. It’s, therefore, necessary to compare the different aspects such as the interest rates, prepayment terms and principal amounts. You should consider all of the options and choose the best offers which align to your pocket in order to make a sound decision.
Know your needs: Personal loans can be a great option if you are in need of quick cash for your personal needs. However, you must know your requirements and seek only the amount you really require in order to avoid any financial burdens. You must also understand whether or not you really require a personal loan or if you require another type of loan. With this, you may be able to save on interest rates and meet your financial obligations.
Beware of misleading offers: Many lenders may attract you with personal loan offers which might look like they are cheap both in terms of the interest rate or with some sort of special offer schemes. However, you must be aware of these offers and deals as it is highly likely that these may have hidden charges which will add up once you start with your EMI repayment. You should always check the details and avoid these schemes.
Avoid approaching multiple lenders: Multiple requests for personal loans are also not good for your credit score since each inquiry is made on the credit report. Applying for personal loans with many hard inquiries in a short time will make lenders consider you “credit hungry” which may result in your application getting rejected or an approval with an extremely high interest rate.
Understand your capability: If you have a credit score below 680, then there are high chances that your application may get rejected. In case it gets approved, you might not get the personal loan as per your desire. Hence, before you apply for the personal loan, you must realise your capability and whether or not you will be able to repay the loan on time.
Conclusion
Taking a personal loan is a good option, however, you must be extremely careful before applying for a loan and use an EMI calculator to plan your personal loan repayment journey so that you stay ahead of the bills and do not make any defaults. With this, you can enjoy the benefits of a personal loan without having much burden on your finances.
