Personal offers are the most expensive. Better offers.

What exactly are personal loans? Personal loans are a form of unsecured loans which become easy to access to people with a certain interest amount that has to be paid – monthly, quarterly, or annually- depending on your loan tenure and the plan that you have chosen.

If you are in immediate need of money due to unavoidable personal circumstances then a personal loan is the best option. Since these loans are unsecured in nature, it is very easy for the lenders to reject the loan applications if the applicant does not match the eligibility criteria and does not have a decent credit score.

There are certain factors to go over before you decide on taking a personal loan. Those are:

  1. Credit score: Maintaining a decent credit score is the foundation of your ability to get any loan. Four-credit information companies (CIC) or credit bureaus like Equifax, Experian, CRIF High Mark, and CIBIL TransUnion provide their proprietary credit scores and detailed credit reports in India. A credit score is most commonly referred to as the CIBIL score which is a three-digit number ranging from 300-900, and also summarises an individual’s entire credit history. All credit bureaus need to provide this score. Usually, a credit score of 700 and above is considered perfect and mandatory. A higher credit score shows that the applicant has a decent credit history and has responsible repayment behaviour. Some healthy financial habits include paying your equated monthly installments on your existing loans as well as your credit card bills regularly, without fail. This would in helping to increase the credit score of the individual. Which increases their likelihood of being eligible to apply for another loan. People who have an existing credit score of 750 and above are usually given the best loan offers. If your credit score is affected due to fraudulent activity or issue, get it solved immediately by informing the concerned lenders and bank.
  2. Ongoing loans: Lenders/banks also skim through the ongoing loans that the applicant already has, if any; to determine their ability to repay the loan and if they are stable to repay the amount borrowed. The ongoing loan EMIs including the one already existent should not exceed more than 50% of the applicant’s monthly income. This is another major factor that the lenders take into consideration before deciding to process or sanction a loan application. The employer’s profile is also another key factor.
  3. Reduce loan inquiries: When the applicant has applied for a loan the lender always asks for your credit bureau to assess your creditworthiness. A lender initiates a ‘hard’ credit history check when applying for loans. This impacts your credit score, marginally. Applying to multiple lenders/ banks at the same time will impact your credit score.
  4. Compare loans online: Personal loans are one of the most expensive loans in terms of the interest that is charged which can range from 9% to 24% per annum. It is better to avoid personal loans unless is it absolutely necessary. Most experts suggest that it is best for the borrowers to initially check with the banks and non-banking finance companies simultaneously to check who has better offers.



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