For different reasons, individuals search for a personal loan, whether it's a serious illness or personal needs. To get funds without any inconvenience, a personal loan is an acceptable option. A substantial number of individuals are now seeking personal loans to fulfill their higher needs such as purchase of a house or vehicle, higher education for children and so on. Individuals can therefore avail an unsecured personal loan issued by banks and NBFCs in order to satisfy their specific needs. The borrower's income standard, credit, employment records, and repayment flexibility are some of the main factors that lenders weigh before issuing such loans. Hence, if you are going or planning to avail a personal loan this festive season, then you must consider the below covered facts and aftermath.
- Before applying for a personal loan, it is imperative for an individual to consider his / her financial requirements selectively without affecting their budget. Remember that you must not choose to opt for something that you really need, because you just have to settle it off within the loan tenure.
- Remember that reneging on such loans may not be a hot choice, as it impacts on the credit record of the individual and poses concerns for potential loans.
- One should strive to take a longer tenure while considering the period for a loan. It will lessen your EMI contribution by selecting for a longer tenure loan, thereby increasing your total interest strain. It will be best to pick a tenure of 1-5 years or 12-60 months. Lenders may deliver various tenures, but on an individual basis, it typically varies.
- By not identifying between necessary and lifestyle-based personal loan standards, it is one of the most prominent faults borrowers make when opting for a personal loan. But if the interest rates and other costs on personal loans are very high, it is best to avoid taking a personal loan based on your personal requirements. A personal loan is not secured against any asset and hence termed as an unsecured loan, unlike a home or a car loan, and hence the lender doesn't allow you to place collateral. Often, when approving a personal loan, there is a greater potential risk and also the interest rates on personal loans are much higher relative to car, home, or gold loans for which the loan provider can not auction anything on your behalf.
- In particular, the use of personal loans has therefore increased rapidly due to banks that are able to provide pre-approved personal loans, particularly to their potential customers. Such pre-approved loans are provided by both banks and FinTech entities on the basis of the borrower's income, credit history and job prospects. However, it will be best to evaluate the interest rates offered by different lenders before taking such pre-approved loans. And you must also keep in mind that EMI amount should not surpass 40 to 45% of your net pay.