People choose to take personal loans for a number of reasons these days. You can take a personal loan to fund almost any expense, be it a big-ticket item you want to purchase, or for funds you need to supplement amounts you spend on healthcare. Several people take personal loans to fund special events like marriages or in specific circumstances, like to meet the expenditure of a child’s higher education. Generally, it’s simple to avail such loans and banks and finance companies approve them. Nonetheless, there are things you should be aware of before you apply for a personal loan. For personal loan application, there are several factors to consider.
What is a Personal Loan?
The most popular loan offered by banks and finance companies is a personal loan. It is a kind of unsecured credit that is meant to meet the requirements of any personal needs of individuals availing it. If you are in a financial bind, for instance, a personal loan often comes as a solution. As it is easily available, it is one of the most popular loans available today. You may be a salaried individual with a bank account and this makes it easy for you to take a loan.
What to Consider
The following must be considered while taking a personal loan:
- The amount to be borrowed – Think of how much you want to borrow and whether your loan issuer will approve that amount. This may be based on your repayment potential.
- When you need the loan – You have to decide when you require the loan and plan ahead.
- The duration of the loan – Check and compare the rates of interest of any loans for which you may apply. For personal loan taking, interest rates fluctuate between lenders and loan durations.
- Calculate your EMI payments – According to interest rates, you can easily calculate personal loan EMI, and this gives you a heads-up about planning for repayment of your loan.
- Extra charges – There may be some extra fees/charges attached to your loan. For instance, most banks and financial institutions charge a loan processing fee as a service charge when you take the loan. Banks may also charge fees in case you want to make repayments before the loan tenure is complete. These fees vary from institution to institution, but it’s important to note that borrowers charge heavy fees for loan foreclosure.
- From where you take a loan – Although banks are the go-to places from which people take loans, they are considered a second option by people at times. This is because their loan processing time is long. If you need funds in emergencies,they may not be the ideal place. Furthermore, you may find that when you calculate personal loan EMI from a potential bank loan, rates may be higher than when you choose other lenders like finance companies.
Most lenders base your eligibility for taking a loan on various factors like your CIBIL score, your capacity for repayment, previous outstanding loans you may have, and the like. There may be a lot to think about before you plunge in to take that personal loan. You can check more on personal loans and what considerations are involved when you take one at Finserv MARKETS.