A personal loan is one of the best ways for any short-term financial emergency or crisis. The loan is extremely handy and can manage both unplanned and planned expenditures. With digitization and the introduction of new-age technology, personal loan processing has become faster, and as an outcome, you can now apply for a personal loan online and receive approval on the same day. Too good to be true? However, this is the truth. Quick disbursement, fast approval and many more parameters like this makes the personal loan option one of the most desired one in the case of emergencies. Well, despite such benefits, there are specific things linked with a personal loan that is untold. But do not be afraid; provided here are a few of the tips on a personal loan that no one will disclose or share with you.
Avail personal loan just when it is most required
This is a major fact that the rate of interest levied on a personal loan is way higher than on other kinds of loans. Thus, keeping this in mind, you must always place an application for a personal loan just when it is necessary. Also, it is essential to understand while a personal loan assists you pay for short-term financial goals, you will be repaying the same for the next some years with interest without fail. Hence, it is essential to ensure that you can make the repayments monthly without fail. Failing to make your repayment will not just levy heavy penalties but will also decrease your credit score.
Be thoroughly careful about the additional fees and charges
Before you make the decision to go with a specific bank for a personal loan, you must enquire about any additional fees other than the rate of interest. Processing charges, verification fees, GST, penalty on late payment loan EMIs, and penalty on foreclosure or loan prepayment are a few of those. So, you must ensure that you factor in other parameters even as these charges may be clubbed to form a larger amount.
Opt for shorter loan repayment tenure
There are banks or loan providers that offer personal loans for higher repayment periods with lower loan EMI. This is extremely tempting for many of you as you may think that you will save a lot on your EMIs. However, the fact is that with higher repayment tenure, your personal loan interest cost even increases while your EMI becomes lower.
Holding a strong credit score can assist you
This is not known to many, but holding a strong credit score can assist you in getting a good deal on a personal loan application. Having a strong credit score endows you with the edge to negotiate with lenders for the best rate of interest.
Research carefully before making an application
There are various personal loan lenders prevalent in the market, each of them offering the same product at a distinct rate of interest. To avail of the best loan offer on a personal loan, it is important for you to conduct in-depth research before choosing the preferred lender. Thus, before you apply, make sure that you have carefully compared the features like rate of interest, processing charges, loan tenure etc. and then picked the lender that matches your needs.
Thus, if you are planning to opt for a personal loan, it is essential that you consider such parameters as they will not just assist you in getting a better deal on loan but will keep you completely safe from future troubles.
Maintain a good credit score
A credit score is an important metric that lenders often use to decide your ability to make the repayment of the loan. Simple acts such as paying your card bills in full and on time can assist in forming a strong credit score. The tip here is to maintain a positive repayment history, not crossing 30 per cent of your credit utilization ratio etc. A strong credit score will allow you to get a personal loan easily.
Compute your monthly EMI carefully
EMI repayments must not drain your savings and convert into a burden upon your finances. To ensure this does not happen, it is essential to compute your EMI and ensure your capital potential to repay it over stipulated repayment tenure. Generally, the computation is that loan EMIs must be below 10 per cent of your income. In the case EMIs are more, you risk draining your investments and savings, and this may negatively affect your regular expenditures.
Select the loan with the lowest rate of interest
A personal loan generally holds a higher rate of interest that can range anywhere between 12 and 24 per cent p.a. Hence, even a minute fall in your personal loan rate can bring about a massive difference to your thorough loan costs. Note that if you go for a low monthly payment over long terms owing to convenience and other reasons, it will result in a higher interest constituent.
If you hold a low salary, then a personal loan for low salary can be instantly availed through digital lenders. Here, in this case, for your convenience in repayment, you can opt for longer repayment tenure. However, note that you must ensure to prepay your personal loan in the future to avoid levying higher interest constituents.
If you cannot prepay, you may go for a personal loan balance transfer facility in the future, wherein you can transfer your outstanding balance on a personal loan at a lower rate of interest. Doing so helps you to reduce your interest constituent and meet your loan faster at your suitable EMI.
Evaluate the need for a personal loan
While it is not considered a bad idea to avail of a personal loan, it is your financial responsibility that extends over a period. Hence, it is crucial for you to evaluate the motivation behind the availing loan and make sure that it is thoroughly necessary. If your purpose for availing of a loan is a whimsical desire to purchase high-end or luxury items, it may be a wise decision not to avail of it.
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