Posted On: 29-August-2021
Dreams can go a long way. Some work hard to make them come true and some are an inch closer to achieving their dreams every day. For some it can be a grand wedding, for others it can be education. For some there may be a health emergency, for some, it may be home improvement. Even with a sustainable and recurring income source, some remain a little distant from achieving their dreams. Now you can apply for an instant personal loan which is a simple process with the current online transaction scenario and fill the distance between you and your dreams.
With a competitive world around you, you may face many challenges that keep you from reaching your dream. Lack of support, distractions, and lack of focus, financial constraints all play a major role in defeating our dreams. You must not be intimidated by all these constraints when you can become financially strong by availing a personal loan easily.
In this article, you will understand the factors to look into and the process by which you can apply for an instant personal loan.
First of all, you should understand that personal loans are less expensive than other loans and are also generally collateral-free. Hence, there will be a clear background verification of your credentials, credit score, and repayment capability according to your income.
Factors you need to look into while applying for a personal loan:
1. Loan Amount and Tenure
Figure out why you need a personal and how much you need. This is the first and foremost requirement for applying for a personal loan. You need to understand that opting for longer tenures may help ease your monthly commitment but may increase the interest burden in the long run. Compare and contrast the tenures and interests offered by different banks and opt for the one which best suits you.
2. Rate of Interest and other hidden charges
After you decide on the amount you wish to take as a loan, the most important factor to look out for is the interest rate. This is the single most important factor that determines the cost of your loan. The interest rate can vary with various factors like your creditworthiness, your monthly income, the credentials of the company you work for, etc.
There are other charges like processing fees and penalties applicable for late/defaulted payments. Compare these charges as they vary from bank to bank.
3. Credit Score
Your credit score is an important determinant of your personal loan eligibility. Your CIBIL Score is a 3-digit number ranging between 300-900. It represents the financial creditworthiness of an individual. If you are into the formal financial sector, a credit score reflects your credit payments, cash flow, existing loans, your repayment capability, and disposable income. A score of more than 750 is considered to be excellent for availing of a personal loan with favorable terms & conditions.
4. Pre-/Part-payment facility
Pre-payment refers to your ability to repay the loan amount before the completion of the tenure. Usually, banks have a lock-in period for personal loans, only after which you can repay the loan fully or partially. If you wish to pay before this period, the banks may charge you a certain amount of money based on the norms of the bank.
Part payment refers to the clearance of a part of the loan before the lock-in period. This also attracts certain charges. Make sure that these charges do not exceed the interest charges that you are being levied.
5. Income Vs Monthly EMI
Analyze your income, expenses, and spendings before you apply for an instant personal loan as it is necessary that you pay EMI every month without fail or defaulting on the payments. It becomes extremely important to analyze your affordability to repay the loan amount taken. Make sure that your monthly income accommodates the EMI payment every month until the end of tenure.
Now that you know what factors affect your personal loan eligibility, let us understand the process of availing of a personal loan in 5 simple steps.
Step # 1
Determine your personal loan amount. Understanding your requirement is the most important step before you apply for an instant personal loan.
Step # 2
Check your loan eligibility. Many banks and financial organizations offer loan eligibility calculators through which you can assess your personal loan eligibility.
Step # 3
You can use an online EMI Calculator to calculate the EMI based on how much you can spare to pay for the monthly EMI without burning your pocket.
Step # 4
Approach a bank and apply for a personal loan after you check your personal loan eligibility.
Many banks offer you the facility to apply for an instant personal loan. This offer can either be availed directly at the bank or online.
Step # 5
Read the loan documents- the T&C and the repayment options, and charges, etc. Submit the relevant documents to apply for a personal loan.
Some banks offer to transfer the funds directly into your savings bank account while others send a demand draft or cheque to your address.
One can avail a personal loan for a variety of reasons- a wedding, medical emergency, debt consolidation, a large purchase, etc. A personal loan is much more flexible than other types of loans because of its flexible EMI options and tenures. Though it is not the only credit option available, it is much less expensive than other options like credit cards or informal lending institutions.
Carefully read the documentation and plan your finances properly before you apply for a personal loan. Make a wise choice when you are choosing the bank, amount, and EMIs. It is better to approach an expert before you apply for a personal loan.