Personal Loans
Finance

7 Tips to Become a Smart Personal Loan Borrower

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A Personal Loan with low-interest rate is an accessible and available solution for meeting numerous expenses, such as a long-awaited vacation, home renovation, or a very essential and indispensable business purchase. The most important thing about Personal Loans is that they fulfil instant cash requirements without the need for risking any collateral. Personal Loans are the best option if you want to avail yourself of some loan without risking any assets. The minimal need for documents, fast availability, and approval without any delay make the Personal Loan so enticing. Here are the tips that’ll make you a smart borrower.

1. Be Sure about the Purpose of the Loan before Applying for a Personal Loan

  • When you opt for a loan, you are in for a long-term commitment, where you need to pay the Equated Monthly Instalment (EMI) to reimburse the borrowed amount. You must pay monthly EMIs in a timely manner, without fail once you choose to go for a Personal Loan. Otherwise, extra penalty charges will get added to your total loan amount. Before opting for this added financial burden, you must calculate everything, including the minimum possible amount for the EMI.
  • You have to be sure about the reasons you are applying for a Personal Loan. Make sure your grounds are well-justified.

2. Check Your Credit Score before Applying for the Loan

  • A low credit score can stand in the way of getting your loan application approved. Your CIBIL Score is vital parameter financial institutions check before giving you the loan. A low score can reject your application instantly.
  • Before approving a Personal Loan with low interest rate, the lender will look into your past repayment history to stave off any fraudulent cases of fraudulence. Remember, you need at least a score of 750 to get your loan approved.
  • It is better to check the credit report beforehand for consideration. If your credit score is low, you need to search for the required measures to jack it up.
  • If the loan is needed urgently, and you have to get your application approved, there is a chance that you have to take the loan with a high rate of interest. Some loan-proving institutions may loan a lesser amount than you applied for to avoid any risk in the future.

3. Do Check Your Eligibility before Applying for the Loan

There are some simple criteria for getting your loan approved. Such as:

  • You are required to be aged between 22-58
  • You need to have a fixed source of income
  • A credit score preferably more than 750

These requirements differ primarily from one institution to another. You must choose the one that suits you and your ability to meet them.

4. Research Loan-Providing Institutions 

There are plenty of banks and NBFCs available in the market in recent times. It is an essential step for you to opt for the lender that suits your criteria and interests. Compare the different rates of interest offered by them. Also, review the additional charges levied by each of them. Once you compare everything, it will be easier for you to finalise your loaner.

5. Get an Idea about the Prepayment Terms

The repayment option and processing fee for a Personal Loan save you interest money and help you cherish the reduced tenure. Various loan-providing institutions levies repayment penalties. This can range from 1%-5% on the remaining loan amount. But for some of them, the repayment penalty is zero. Choose your lenders depending on the availability of all these facilities.

6. Stay away from Sending Multiple Loan Applications for Approval

Sending multiple loan applications to several banks or loan-providing institutions may  reduce your chances of getting a loan. Numerous applications can take a toll on your CIBIL Score. They may think that your need for a loan is severe, and your finances won’t allow you to repay your loan on time. Your chances of getting a loan will come down very fast, hurting your eligibility to request a loan in the future.

7. Hang on for a While before Reapplying for a Loan

Unfortunately, if your loan application gets rejected, please wait for at least 4-6 months before reapplying. Even if you need urgent funds, hanging on for some time is advisable. Wait for some time, let your credit score improve, and then reapply.

To conclude, the aforementioned tips will navigate you to become a smart Personal Loan with a low-interest rate borrower.

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