Personal loan is a convenient option when you are in need of urgent cash. However, these are complex, and you need to know about their basics before availing one.
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Before you select your personal loan:
Calculate the cheap loan offer: Personal loans come with very high interest rates ranging from 13% to 24%. Check and compare rate of interest offered on a personal loan and get the complete picture by understanding the annualized interest rates for each offer.
After this, analyze the total amount of repayment you need to pay with all the offers available in the market.
Processing Fee: You need to check the processing charges and other charges related to personal loan.
Prepayment penalty: Ask up-front if there would be any penalty for prepayment of the loan at any point in time. Many a times customers plan to pay their loans earlier than planned to be relieved of debt. Hence, its essential to know if your personal loan offer allows part pre-payments.
If that is the case, then you should be aware from what time frame in the loan period, you can start prepaying and realize the cost you incur for such prepayments in part or full.
Monthly payments and Tenure: Check all the offers available in the market and compare all the deals. Also analyze the amount that you can pay on a monthly basis as EMI. A loan that offers lower monthly payments and longer tenure seems to be attractive however not all such loans prove to be cost effective in the long run.
Hence, first calculate the total loan cost and then try to opt for a higher EMI, which you can comfortably manage to enable shorter loan tenure.
Check your credit score: Credit Score plays a very important role in your loan approval. Generally, loan is offered to a person who has a credit score more than 700. A person having a credit score lower than 700 may get a loan but with higher interest rates.
The eligibility criterion to avail a loan varies from bank to bank. Usually, banks have divided the borrowers into three categories, which are salaried individuals, self-employed individuals, and self-employed professionals. The other factors that are taken into consideration are residence, age, work experience, past obligations, repayment capacity, and place of work.
The Documents Required for a personal loan are lesser, and hence make personal loans the fastest approved ones . Usually the documents required are ID proof, Address proof, income proof, etc. There are a few banks that require guarantors and the same set of their documents.
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