Loans or credits are primarily divided into two categories, secured and unsecured. In the case of secured loans, every borrower needs to mortgage an asset to avail of the credit. Conversely, unsecured loans come with a contrasting operating principle and require applicants to fulfill minimum eligibility criteria only for approval. It is one of the top reasons why unsecured advances like personal loans are so popular among borrowers.
Individuals must, nevertheless, apply for a personal loan only after detailed preparation to improve their chances of approval. They also need to gather as much relevant information as they can, as it will increase their chances of securing a better deal. Further, here are some vital facts to keep in mind before deciding whether a personal loan is a good choice or not, and making a personal loan application.
Top six facts to know before applying for a personal loan
- Credit score requirement
Credit or CIBIL score plays a pivotal role in any loan application, typically unsecured advances. This 3-digit figure represents the creditworthiness of a borrower and helps financial institutions assess risks associated with him/her. Typically, lenders prefer a score of 750 or above for personal loan approval.
Therefore, check your credit score before applying for a credit, and for any discrepancies in the credit history, send an application for such rectification with documented proofs. It will, in time, reflect on the score, thus helping with a hassle-free and swift loan availing process.
- Interest rates applicable
Before going ahead to apply for a personal loan, do not forget to check the interest rates prevailing in the market. Compare rates from multiple lenders to arrive at the lowest rate possible for increased affordability. Applicants can also negotiate for better rates with improved eligibility like higher income, employment with a reputed company, etc.
- A suitable loan amount
Personal loans are usually high-value advances that help borrowers fulfill their big-ticket funding needs with ease. Also, they do not come with any end-use restrictions, making them suitable to meet diverse funding needs. Nevertheless, it is better to evaluate the expenses for which you seek the amount and determine the final loan amount accordingly.
Also, make sure to consider your repayment capacity before you apply for a suitable financial plan. You can do so with the help of a personal loan calculator available online.
Further, additional factors to take care of for improved eligibility before you apply for a personal loan include –
- Do not submit multiple loan applications
When individuals make a loan application, the lender enquires about their credit history and score. Such verifications are considered as hard inquiries and can adversely affect the applicant’s credit image. Making multiple loan applications also increases the chances of rejection.
Therefore, customers should refrain from the practice of making multiple loan applications and apply for an advance only when the chances of approval are high.
- Other charges involved
Every loan has some additional costs like foreclosure charges, processing fees, late payment charges, etc. associated with them. Not considering these can increase the cost of lending. Hence, go through the fine print of a personal loan to learn more regarding the charges on your selected loan option.
Also, consider the personal loan tax benefits, if applicable, to assess the effective benefits arising out of this advance.
- Do not fall for any lucrative loan offer
Borrowers may come across loan offers that promise comparatively low-interest rates or other tempting benefits. However, the fine print of such a scheme may carry additional charges, making the loan unaffordable. It is thus essential to assess all the details of such offers before you apply for a personal loan.
Further, NBFCs like Bajaj Finserv provide convenient financing of up to Rs.25 lakh at attractive interest rates. Flexible tenure, quick approval, and minimal documentation are some other prominent features of the loan option.
The lender also provides pre-approved offers to streamline the loan application process and helps save time. The offers are applicable to multiple financial products like personal loans, business loans, credit cards, etc. Borrowers can check their pre-approved offer by submitting their essential contact details only.
Now, whether it is a good idea to avail a personal loan or not solely depends on an individual’s select requirements combined with the choice of loan opted for. Nevertheless, if anyone is planning to avail of the advance, he/she must consider all the loan details to make a suitable choice to finance their funding needs appropriately. Also, make sure that you know how to apply for a personal loan to complete the application process without any hindrances.