Things you need to think about before applying for a personal loan
A personal loan is an unsecured (does not require collateral or security) loan that can be acquired for any unspecified need. These are readily available from banks, NBFCs, and online personal loan apps. The interest rates on these loans are usually not very high and they have flexible repayment options. But whether a personal loan is availed from a physical organisation or online as an instant personal loan, there are certain factors that a borrower should keep in mind.
Loan processes and repayment is far simpler now than it was a few years ago. But let that knowledge not overshadow the fact that any loan is a financial commitment that does not take much to turn into a financial burden. Consider all your options before opting for a loan. Ask yourself if there is any other source from where money can be pooled in or borrowed. A very essential task one needs to complete before starting to look at loans is to understand your finances and draw up a budget. How much are your monthly expenses that cannot be altered? What are your earnings? How much have you saved in the past six months? Do you have any investment or investment plans? Irrespective of why a personal loan is needed, a clear picture of the borrower’s finances is not only beneficial to them but also to the organisation that may lend out money. Many financial organisations ask for financial records of the borrower when a loan proposal is under review.
A borrower must have a look at their credit records before opting for a personal loan. A credit score of 710 and above is usually required for easy approval of a personal loan. Before the loan organisation starts reviewing your records, take a look at the records yourself. Credit records include repayment history of EMIs of previous loans if any; credit incurred on credit cards and repayment history of credit; credit utilization limit not crossing 30% of credit allowed and various other financial practices. Better the credit score and more stable the credit records, the easier will it be to acquire a loan. There are many banks, NBFCs, and online personal loan apps that will readily offer a personal loan. But it is always wise to do a comparative study between the terms and conditions of several loan options. Start with the organisations you have an established financial relationship with. Move onto other companies and online personal loan apps. Loan offers are also far more than just affordable interest rates. A borrower needs to check all other factors and choose one that will be the most comfortable for their financial needs. Have you thought of how to repay the loan? This is not just a question a borrower should ask themself but something any bank or NBFC will ask as well. Before applying for a loan a borrower should assess their finances to understand how they would repay the loan. It is suggested by financing experts that one should ensure that EMIs for a bank loan should not exceed 50% of a person’s income. If a person ends up paying most of their income as EMIs for an extended period, the loan will end up creating a more negative impact than positive. Financial organisations also would not look forward to sanctioning a loan if they realize that the person does not have a stable repayment plan.
If required, personal loans are an incredible source of money that can help with a lot of issues without hassle. But do not let your finances suffer in the long run just because the lure of quick and instant personal loans is easy to give into. Plan, acquire, and pay back a loan only on need and after a thorough assessment.
Disclaimer: This is a company press release. No HT journalist is not involved in creation of this content.