Personal loans can be a lifesaver when you are in need of an urgent financial emergency. Whether you want to renovate your dream house, plan your life changing wedding, go for a refreshing trip with your family, personal loans have no restrictions on end usage. However, personal loans come with higher interest rates as they are unsecured loans that are easier to avail and require minimum documentation. You can apply for personal loan easily but you need to conduct extensive research to grab the best deal of personal loan at attractive interest rates.
Therefore, you need to follow some rules and take certain precautions before applying for a personal loan.
Determine the amount you need
Determine the approximate amount you require and only apply for a personal loan in that amount. Because a personal loan is unsecured and simple to obtain, it has a higher interest rate. As a result, you should avoid applying for larger amounts because it will cost you a lot of money in the long run and you will have to pay larger interest. Instead, apply for only the amount you require, making it easier to repay the loan on time.
Search and check for best deals with affordable interest rates.
Different lenders offer different interest rates based on their eligibility criteria. You need to search and check for the best deals to get a personal loan with the lowest interest rate. Lower the interest rate, the lesser will be the cost of your personal loan. You may find research to be tiresome, and you may choose any lender, but you may miss out on some of the best deals in the market as a result. Hence, looking for the best deals is critical.
Compare the deals offered by several lenders.
Personal loan interest rates are heavily influenced by the applicant’s personal characteristics. Personal loan interest rates can differ from lender to lender because they are determined by the lender’s eligibility criteria and the borrower’s required factors. For example, if you meet all of the lender’s requirements, you may be able to obtain a loan with the lowest interest rates. Certain lenders may have special offers for you if you work for a reputable organisation. Therefore, you need to do efficient research and compare the deals offered by different lenders and choose the best deal for you.
Calculate your credit score.
A high CIBIL score is essential for obtaining a hassle-free loan. The CIBIL score reflects your creditworthiness and is one of the most important factors to consider when applying for a personal loan. It ranges from 300 to 900. The closer your credit score is to 900, the more likely you are to be approved for a personal loan. Borrowers with a CIBIL score of 700 or higher are preferred by the majority of lenders. As a result, before applying for a personal loan, you should check your CIBIL score. If your CIBIL score is low, you can still get a personal loan with the help of a high-credit guarantor.
Check for prepayment and foreclosure charges.
After taking out a personal loan at fixed EMIs, you may choose to repay the loan if you have enough money in future before the completion of the loan term. This is known as prepayment, and it is done to reduce the total interest outlay on the loan. In addition, once you have paid off your entire loan, the lender will send you a foreclosure letter.
Certain lenders will also charge you a high fee if you prepay or foreclose on your loan because it is their loss. The exact foreclosure charge can be found in your loan document. Make sure to carefully consider these additional costs. If you can’t find them in the fine print, contact your lender directly. It’s always best to go with a lender that has a low or no prepayment fee.
Check for any hidden costs.
Many lenders offer personal loans with several hidden costs such as default penalty or processing fees which are exposed after you finalise the loan. Be aware of any hidden costs before finalising your lender as these may burn a hole in your pocket.
The Bottom Line
Personal loans are the best option when you are in a dire financial situation and require funds immediately. Personal loans online are also available to make the application process easier.
The most important factor is to conduct thorough research before settling on a lender, to review your eligibility criteria, to be prepared with your documents, and to select the best personal loan interest rate. You need to follow the above rules and take precautions so that you can grab the best deal without missing good offers in the market.