Quick Steps You Should Keep in Mind While Availing a Personal Loan
A personal loan can be availed for any purpose, whether to mitigate home renovation requirements or unexpected medical expenditures; it serves as a supplementary funding source in times of urgent need. Unlike a car or gold loan, a personal loan is an unsecured option. This means the loan is not secured against any specific asset you own. While availing of a personal loan, you are not required to provide any security like real estate assets or gold.
Thus, if you are looking to apply for a personal loan to address cash mismatches, it is crucial to understand the loan’s characteristics and what essential steps you should consider before you hit the personal loan apply online button.
Check out some quick steps before you apply for a personal loan:
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Check your credit score
A credit score is an essential metric lenders use to determine your loan repayment potential. Simple acts such as maintaining a balance between secured and unsecured credit options, repaying credit card bills and EMIs by the due date, holding a CUR (credit utilization ratio) of within 30 percent, etc., can create a strong credit score. Ideally, a strong credit score equals 750 and above. Thus, maintaining a good credit score will boost your chances of getting a personal loan.
Select the lowest interest rate.
Personal loans generally have a higher interest rate ranging from 10-24 percent p.a. Thus, even a slight drop in the individual loan interest rate can create a huge difference. Note that it will have the highest interest if you go for a low monthly repayment over a long tenure for convenience or other reasons. Thus, ensure you avail yourself of the lowest personal loan interest rate and a suitable repayment tenure per your repayment capacity. Do not unnecessarily opt for a higher repayment tenure to avail of lower EMI, as doing so may make you lose a lot in the form of interest outgo.
Compute EMIs carefully
Personal loan EMI repayments must not wipe out your investments and savings and burden your finances. Computing your EMI amount and checking your repayment capacity over a stipulated repayment tenure is vital to ensure this does not occur. Lenders prefer your monthly repayment obligation, including your new personal loan, to be under 50-60 percent of your monthly income. You can calculate your EMI quickly using the personal loan EMI calculator.
Ending note
Before you hit the personal loan application button, ensure it is available for the right reasons and not for any speculative purpose. It is also essential to ensure that your lender is a transparent player and that your repayments are consistent and prompt to maintain a good credit score.
