You too might be considering a personal loan to tide over a fiscal crisis. With lenders carpet-bombing customers with personal loan offers, you’ll need to act practically to get the best end of the deal. Here’re six simple yet useful tips that’ll help your cause, big time.
Determine your needs:
When you get a personal loan, you are contractually bound to repay it in full, within the pre-agreed tenor. The principle, the interest and applicable charges should be paid in Equated Monthly Instalments (EMIs). Do we need to say that the EMIs strain your monthly budget?
The thumb rule is to carefully evaluate your needs before jumping into the personal lending bandwagon. Prefer loaning to fund urgent requirements, such as a medical surgery or for some productive purpose that’ll generate revenue. Also evaluate the exact amount you need, as over loaning costs you higher EMIs while under loaning won’t meet your fund requirements.
Research the market:
Wise borrowing decisions are based on market research. The deeper you dig, the better options you’ll get. So, jumping on to the first lender you come across doesn’t make any sense.
Market research is easy when done online. Start by shortlisting a few credible lenders and then compare their personal loan interest rates and other applicable charges that decide your total cost of borrowing. Also research the terms, tenors, repayment schedules and other aspects. Remember, all these aspects are lender-specific, meaning they vary from lender to lender. It’s thus imperative to research it all beforehand for educated loaning decisions.
Evaluate all costs:
Cost of borrowing depends on several factors, notably the interest rates, processing fees, penalties for prepayment and late payments, and more. Once you have shortlisted the lenders, the next step is to assess every component that directly affects the cost of borrowing.
Also, read the fine print to know whether any hidden fees like arrangement fee and handling charges are involved. Remember, the devil is often in the detail. With an exact idea of the costs involved, deciding whether the loan is affordable is easy and so is managing your finances.
Maintain Acceptable CIBIL Score:
Credit Information Bureau (India) Limited allots a score between 300 and 900 to every Indian based on his/her credit history. The score is known as CIBIL score. A CIBIL score of 750 or above means you are a responsible borrower with an excellent record in debt management.
Every lender is interested in your CIBIL score, as it indicates your creditworthiness. The lender readily offers you personal loan interest rates if your credit score is above 750. To achieve and maintain it, pay your debts on time, month on month. Maintaining financial hygiene, keeping credit utilisation below 30% and interfacing with CIBIL Company to rectify issues also help.
Check the eligibility:
Loaning is subject to specific eligibility requirements. You’ll get a personal loan only if a set of eligibility parameters is met. The caveat is that each lender has its eligibility criteria, regarding your monthly income, age, employment status, credit history, and more.
So, it makes sense to determine the eligibility requirements before applying for credit. Just log on to the lender’s website or visit its nearest branch to know whether you qualify for the loan.
Banks aren’t the only option:
If you think banks are the only option for a personal loan, think again. NBFCs are giving banks a run for their money, offering easy and quick loans at affordable rates. You can even expect highly personalised service, tailored repayment schedules, and flexible terms with NBFCs.