Things To know Before Applying For Personal Loan
Before applying for a personal loan, you must be well-versed with the application process such as documentation and credit score required, interest rate applicable, loan repayment period, prepayment clauses and so on.
Personal loan is convenient and flexible and is not like a home or car loan. You can use your loan amount for a medical emergency or even for shopping jewelry. The bank will never ask you about the end use of the personal loan amount. But before going on this venture, let us understand some of the core facts about personal loans.
Documentation and Credit Score
It is essential to understand that approval of personal loans is dependent on your income records, employment status and credit score. You are not supposed to provide any kind of security and also you are not required to show any property documents for verification. It is solely based on your creditworthiness. Hence, before applying for a personal loan, get your credit score checked from CIBIL. If it is not proper, then work on the loopholes. Check whether you have the required documentation in proper form.
Check the interest rate
Other influencing factor about personal loan is the interest rate offered by the banks. If you have a good credit standing, then banks will charge you with reasonable interest rate. But if you have a bad credit, then banks may offer less loan amount and charge higher interest rates. Please check whether it is worth of paying higher interest for a longer period of time. It is better to withdraw the application then. Some banks tend to demand exorbitant interest rates from the customers. Hence, it is advisable to approach maximum banks and get well-versed with the interest rates. Choose the appropriate bank offering the best and competitive interest rate. In future, you should not feel a burden of the interest rate in repaying the loan amount.
Terms relating to loan repayment
We must immediately think after the loan repayment period as well. Is the tenure and EMI amount suitable for you in future? Will you feel over-burdened with the EMI in future? What if you fail to repay an installment? What will be charges for default of EMI? It is necessary to know all these details of repayment. After application, it is approval. And after approval, the repayment starts bothering you.
Terms relating to loan prepayment
If you get surplus bonus from your office or any inheritance from your family member, then you immediately think about repaying your dues off. Understand whether you are required to pay any prepayment penalty in future or not. Some banks do charge prepayment penalty and some have even waived it off. It is beneficial if you get this knowledge beforehand.
Finally, it is also vital to understand whether any security or guarantee is required. Banks may come up with such requirements at later stage. Hence, it is better to confirm this at the beginning itself. You must also know the reliability and integrity of your bank in providing personal loans.
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