Top 7 Tips To Follow Before Taking A Personal Loan.If you are in need of some instant cash, then you can take a personal loan. Currently, there are around 10 banks in India offering personal loans. If you really want to make a choice for the best bank, there are some things you need to compare including – loan amount, EMI, and interest.
If you want to take a personal loan, there is no collateral involved. You can take large amounts as personal loans and you have to pay back the loan within five years. You can take a personal loan for a wedding, to buy consumer goods, and to organise a holiday.
Choosing A Bank For Your Personal Loan
Before, you go ahead and apply for a personal loan, make sure you have chosen the best bank. You can make the best choice; all you need is to follow the simple process mentioned below –
● Your first step is to find out the best banks in your surrounding area offering the best personal loans. At times, there are some limits on how much loan the bank can give. However, if you want more money, you should consider looking for other banks in your nearby area.
● Collect all the necessary information from the banks in your area. When you have all the information you need, compare all of them to make the best choice. Once, you have done this, apply to your chosen bank. Avoid first applying for a number of banks and then choosing the best one.
● Also, check the EMI per month you will have to pay on a monthly basis. You can then multiply this by the total time period of the loan, this is how you will get to know how much amount you will have to pay extra. Carry out this process with different banks to know where you will have to pay the least.
● Most of the banks may charge a processing fee to disburse your personal loan. You can also compare the fees of different banks to know more about the expenditure. You don’t have to pay any amount to anybody while taking a personal loan.
● If you want to serve some immediate purpose, then one of the key considerations is the disbursal of the loan. It is important you have compared time period for the different banks. If a bank sends one of their representatives to your house to complete all the formalities, then this really helps in quick processing of your case than a bank asking you to visit the branch personally.
● In the event, you are paying your loan in a lump sum, it is important to compare the prepayment charges for the different banks. Make sure you choose a bank offering 0% prepayment charges.
● One of the key things you need to consider is the interest rate while choosing a suitable personal loan. There are two types of interest rates –
1. Flat interest rate will remain the same throughout the time period of the loan. This one can prove quite expensive. So, it is advisable to avoid this type of rate.
2. Reducing balance interest rate is calculated on the principal’s reducing amount. You can choose this option while paying off your personal loan as it is less expensive.
● Make sure you have collated all the above-discussed elements while choosing the best personal loan for you.
Benefits Of Personal Loan
In case you have a pressing need for cash, you can go for a personal loan. Following are some of the key benefits of taking a personal loan –
● You will not be asked any questions while taking a personal loan. The bank is not concerned with how you are going to use the money, but the only thing your bank is concerned about is your ability to pay back the loan on time.
● You don’t have to provide any collateral or security.
● The whole process of acquiring a personal loan is swift and hassle-free. Most of the personal loans are paid within a week. You only need to provide some documents.
● You can avail a personal loan in India between Rs. 50,000 and Rs. 30 lakhs.
Tips To Follow Before Taking A Personal Loan
Choose The Loan Amount Carefully
Before you apply for a personal loan, it is important you have considered your financial status. Have a look at how much amount you can comfortably borrow and also whether you will be able to repay the amount on time. Some lenders will offer you large amounts, which means you may get stuck in the debt trap and you will be paying more interest as you have borrowed more than you can actually afford. Make sure you are watchful of such situations.
Make The Most Of The Credit Score
If you have a high credit score, you can have better interest rates from the banks. Various banks will offer different interest rates on the basis of your credit score, credit score around 700 is considered impressive. When you have a good credit score, you can ask your bank for a lower the interest rate.
Compare Banks
Before you finalise a loan, it is advisable to look for what other banks and lenders are offering. You must be aware of the fact that the interest rates vary from bank to bank, go for the bank offering lower interest rate. You can have an optimal personal loan, all you need is to compare different EMI options and interest rates.
Avoid Applying Too Many Loans
Whenever you apply for a personal loan, you end up leaving a footprint on your credit record, which your bank and lender refer while approving a loan. If you are applying too many loans in short period of time, then your bank and lender will deem you as a potential credit risk.
Check The Interest Rates
Don’t get influenced if you are offered a lower interest rate. Most of the times, banks don’t mention that the interest rates are only applicable for the flat rates. Make sure you go for diminishing interest rate, which means you will be paying interest only on the outstanding loan balance, as compared to a flat rate, where you have to pay interest on the total loan amount.
Read The Loan Document Carefully
It goes without saying that read the loan documents thoroughly. You should be aware of the terms and conditions. Very often, the personal loans are marketed by the bank’s agents who are just concerned about meeting their sales targets than giving you right & updated information. So beware.
Scrutinise Various Other Options
Secured loans generally have cheaper rate of interest. Therefore, if you have security that you can use, then make sure you have examined this option before you go in for a high-interest personal loan.
Author Bio
Sophia Jones tries to live her life like the sun – setting her sights high and vowing to always rise up again. Always game for an adventure, Sophia loves widening readers and her own expectations of our vast, beautiful world. As a journalist, Sophia writes to inform. As a creative writer, Sophia strives to inspire. Overall, she hopes to captivate. She currently writes for Paisa.co on credit cards, banking, personal loans, insurance and investing etc.
