How to plan your Personal Loan when applying for the first time?
A personal loan is an ideal credit resource that everyone thinks of availing at times of financial emergencies. However, it is not only the financial emergencies that call for the need to opt for a personal loan. At times, a personal loan is availed of, even with prior planning. The loan is preplanned, keeping in mind certain future expenses like education expenses, weddings, or a vacation abroad. But before opting for a personal loan, whether planned or urgently availed, one needs to assess certain aspects, which are:
Assess your needs- Assessing one's needs before opting for a personal loan is a prerequisite. Even before planning your loan, you need to be sure about various things. The borrowers should be confident of their requirement for a loan and should identify whether he or she needs the loan or not? Just because a personal loan can be taken for any purpose doesn't mean you should opt for it without giving it a thought. Further, a personal loan can be borrowed for a maximum amount of Rs. 75 lakhs for upto 60 months. The borrower should assess how much of a loan amount he or she needs. Also, the amount borrowed should be within the repayment capacity of the borrower. Thereby identify how much amount you need to borrow and in what time you will be able to pay it.
Ensure Eligibility Factors- Ensuring eligibility factors like credit score before handed would add more to the ease in obtaining a personal loan. Checking your credit score will make you aware of where you stand as a borrower. If your credit score is significantly low, you need to rethink your decision to take a loan. If it's high, you are creditworthy and should proceed further. Thus, checking credit score could give you an insight over your loan eligibility. This will help you consider your loan responsibility seriously. A personal loan requires a credit score of 650 and above. However, it may differ from lender to lender, according to their terms and conditions. Thus, checking your credit score could help you identify a suitable lender for you. You can check your eligibility with a Personal loan eligibility calculator that can help you meet the eligibility criteria of the lender you wish to opt to avail of the loan.
Plan your EMIs- A loan is not merely taking money; it is borrowings that need to be repaid. The loans are repaid through EMIs, or what are called Equated Monthly Installments. However, EMI is a big responsibility that a loan borrower has to take up. Before opting for a loan, it is better to plan your EMIs in advance, so that it doesn't turn out to be a burden in the long run. EMIs can be calculated in advance through a Personal loan EMI calculator. Through these calculators, the potential borrowers can get an estimate of the EMIs, and they can plan their expenses easily. For instance, you can opt to pay your EMIs through your salary accounts if it fits well between your savings and expenses, and thereby finances can be well maintained.
Be Ready with Documents- Meeting documentation requirements is essential to opt for a personal loan. A personal loan requires basic documents for verification processes like address, age, income proofs, along with Identity proofs like Aadhar Card, PAN Card, Voter Id card, and Bank statements. Keeping these documents handy will help you get a personal loan in no time. Further, if the borrower is ready with the documents, the loan application process will become hassle-free and smooth.
Be Aware of all Charges- Multiple lenders provide personal loans to potential borrowers. These lenders offer loans at interest rates that vary with each lender. In this case, it becomes the need for the borrower to research well by gathering, analyzing, and comparing interest rates that vary across lenders. A borrower should choose a lender who offers the minimum and most affordable interest rate on the desired loan amount. Choosing a loan lender should not be solely based on the interest rate. Make sure you consider other charges that are to be included in the loan process, like processing fee, form charges, etc. Also, ensure that no hidden charges are included in calculating your EMIs.
Keep a Check at the Foreclosure Rules- It does not necessarily mean that you need to avail the loan till the tenure chosen at the beginning of the loan procedure. A loan can always be closed before the end of tenure, through the foreclosure facility. However, there are certain prepayment charges charged by banks on foreclosure of a loan. Also, the foreclosure rules vary across banks and other lenders. While some lenders charge the borrowers on foreclosure, various lenders even provide options like NIL charges on foreclosure. Thus, just like the personal loan interest rates, researching the foreclosure charges is important before opting for a personal loan.
On a concluding note, a well planned personal loan is a wise financial move. Unlike a loan taken without planning, a planned personal loan can help you make the best use of your loan. Preplanning a loan in advance makes you aware of the loan responsibility that is about to come. Planning your loan gives you the advantage of guiding your financials in the direction you desire instead of falling prey to the debt trap. Therefore, preplanning personal loans by incorporating the aspects mentioned above is advisable for first-time personal loan borrowers.
Author Bio:- Megha Khanna is a budding content writer and an avid reader. She has done her Masters in English Literature and loves exploring different niche like Finance, Fashion, Travel, and Entertainment.