The Need for Personal Loans

Personal loans are easier to acquire than other kinds of credit, making them ideal instruments for fast funding. Hence, their utility in meeting emergency expenses. Such loans give you a predictable monthly amount to be earmarked for the repayment of the loan in instalments (EMIs) over a certain clearly defined duration for repayment (the loan tenure).

However, one must be cognizant of the different factors that influence the process of obtaining a personal loan, whether they be personal loan eligibility criteria, the cost of obtaining one, the reliability of the lender, etc. Quick disbursement is a key advantage of personal loans, with many providers offering instant personal loans online with flexible EMI options despite low credit scores.

There are seven essential things to keep in mind when taking a personal loan. These factors are as follows:

1. Rate of Interest

The interest rate of a loan is the most important determining factor as it is variable among lenders. The interest rate for a personal loan is ideally lower than that of other kinds of loans and credit cards. However, all the associated charges are not immediately apparent when it comes to different lenders. So you must compare different providers to settle on the one which offers the interest rate that works for you.

     2. Credit Score

The most important factor in personal loan eligibility criteria is creditworthiness. If you score well, you’ll get a lower interest, be in a position to negotiate better, receive quick approvals, and much more. Ensure that you repay all your outstanding loans diligently to reap the benefits of a good score. The credit score is measured in terms of the CIBIL score, and a score of 750 or above puts you in a good place. 

    3. Eligibility Criteria

The personal loan eligibility criteria are variable among different lenders. The bank representative or website can give you the best idea, so do ask them in order to get clarity on their loan eligibility criteria. Commonly, most loan recipients are between the ages of 21 and 60, but again, the upper age limit may vary between banks. Income is a make-or-break factor since your income levels help you convince the bank that you are fully capable of repaying the loan within the required timeframe.

   4. The Amount to be Borrowed

You must always keep in mind how much you intend to borrow because whether or not the loan request is accepted will depend on both how much you consistently earn and whether you were and/or are diligent in repaying previous or outstanding loans. Also, make sure the amount you have in mind isn’t too low to meet the expense you intend it to cover. All this must be factored in to ensure that the personal loan you obtain works for you.

   5. Lender Credibility

Choose a lender who is reliable, well-established, fair, predictable, and transparent. The lender must keep a record of all repayments made, or disputes are inevitable. The record-keeping standards should be very high. If the lender is irresponsible and disorganised, their collection agents might trouble you despite you not being in default. Several lenders offer instant personal loans online with very attractive terms. However, there is a ‘caveat emptor’ element in these advertisements. So, it is important to watch for providers who seem to not care about your credit history or lack a proven track record. Deal only with reputable brands.

   6. Read Between Lines: Go Through the Fine Prints Carefully

Please make sure to read the personal loan agreement with great caution and go over every minor detail and clause. As I wrote before, check the lender’s website for its credibility and status. Customer reviews can be a more or less reliable guide alongside complaints against the lender. Such information reveals hidden additional costs associated with repayments or deferred payments.

   7. Choose an Affordable EMI

After obtaining a loan, you must be able to pay the instalments regularly with diligence while avoiding penalties. The right EMI allows you to achieve this successfully. Please use an online EMI calculator to compute the EMI amount you’ll have to pay for the loan you seek to obtain. Such online EMI calculators utilise your inputs regarding the loan, such as its amount, interest rate, processing fee, tenure, etc., to give you a final number that you can then use to take a call.

You must think deeply and clearly about each of the points above before taking a personal loan. The understanding that stems from these considerations helps you increase the likelihood of loan approval. The key points to remember are the reputability of the lender, the awareness of hidden charges, the appropriate EMI amount, the best available interest rate, a sufficient loan amount, and, of course, the personal loan eligibility criteria.