You can smartly and effectively navigate financial gaps generated by COVID 19 in your life with the help of a Personal Loan. Whether you need money to pay medical expenses, company invoicing, or household maintenance, you can apply for an Instant Personal Loan from the comfort of your own home.
You can select an Instant Loan option based on your needs from banks, NBFCs, and digital-only lenders. Customers of different types can take advantage of the personalized offers. However, you should be aware of the dos and don’ts of applying for a personal loan in India.
Dos for an Instant Personal Loan
1. Determine why you require a loan in the first place.
Remember that all loans must be repaid on time and will incur interest charges. So your purpose for obtaining a loan should justify it. Popular causes include medical emergencies, house renovations, purchasing a new item when one is desperately needed, and so on.
While there is nothing wrong with taking out a personal loan for vacation or purely recreational purposes, you must ensure that you will be able to return it (which we will cover in the next point).
2. Compare the rates of interest of different lenders
Because personal loans have the highest interest rates, they should be the primary decision factor when choosing an instant personal loan. The interest rate typically runs from 11% to 28% p.a., but might go higher depending on the lender. While the Equated Monthly Instalment (EMI) appears to be inexpensive, when the loan term is 4-5 years longer, you wind up paying much more than the principle amount. Many banks entice clients with various offers that reduce yearly interest rates by 20bps to 50bps (i.e. 0.20% to 0.50% p.a.). If your credit history is solid and your credit score is high, you should use it as leverage to negotiate a lower interest rate with your bank.
3. Read the Fine Print
Make sure you read the fine print of your loan agreement before signing on the dotted line. You must grasp the personal loan’s terms and conditions, including the interest rate, any hidden fees, and payback terms. Take notice of any potential penalties for late payments or early repayment. If you have any questions or concerns, please contact your lender for assistance.
4. Plan a repayment strategy
You should have a viable repayment strategy in place before asking for an immediate personal loan. Obtaining a personal loan has become a child’s play with an online application process, yet imprudent borrowing can lead to unmanageable debt or debt overhang. A repayment strategy will ensure that you repay your debt without incurring any financial hardship. Personal loan calculators, which are available on numerous financial websites, can help you determine your EMI and prepare accordingly. When arranging your repayment strategy, keep in mind your fixed and variable expenses, as well as any existing EMIs.
Don’ts of Taking a Personal Loan
- Don’t Apply for more than one Loans at the Same Time
Taking or applying for many loans at the same time, regardless of your income, can lower your credit score. You will also find it challenging to track and repay many loans at the same time.
Also, your loan should not exceed 30% to 50% of your FOIR (Fixed Obligations to Income Ratio). Your FOIR is a crucial statistic for loan eligibility, and if a significant portion of your income is dedicated to loan repayments, your loan eligibility will suffer.
- Borrow From Questionable Lenders
People can now apply for fast personal loans through a variety of channels and apps. Though these offers may appear very appealing to you, they may be scams that take a person’s identity and money. As a result, it is best to choose lenders only after thoroughly investigating. Also, avoid offers that appear too good to be true. Consumer reviews can be found on the official websites of many lenders.
- Choose the loan term based on your needs.
Personal loans and fast personal loans often have loan terms ranging from one to five years. To make the EMI appear more inexpensive, lenders present you the EMI calculator with the longest loan length without even revealing the interest rate. However, keep in mind that the longer the loan term, the more expensive the loan. As a result, rather than choosing the longest loan tenure, you should examine the rate of interest and calculate the cost of the loan for your selected loan tenure. This will assist you in selecting the appropriate loan tenure based on your needs.
- Apply for more than you can afford
You may be eligible for a larger loan amount; nonetheless, it is recommended that you only accept what you need. Personal loans have significant interest rates; therefore, it is critical to assess your repayment capacity before applying. Even if the payment is acceptable, it is critical to consider any unexpected situation, such as job loss or a medical emergency. Saving for retirement, your goals, emergency savings, and so on may be difficult while repaying the debts.
- Don’t Forget a Single Repayment
If there is one rule that cannot be broken when it comes to loans, it is this: do not skip even a single repayment. In some cases, the lender may grant you an extension, but in most cases, you will be required to pay a fine. This will also have a substantial impact on your credit score.
Obtaining a personal loan is very simple these days thanks to online apps, but when presented with various options, decisions may not always be correct. The preceding dos and don’ts will assist you in this regard.
Before applying for a personal loan, keep your credit score in mind and make sure you have a repayment plan in place. Get a loan just when you need it, and shop around before deciding on the best one.