- July 11, 2020
- Posted by: Ganeshcbani
- Category: Blog
There are many decisions you have to make when it comes to taking out a personal loan, such as interest rate, repayment term, and how much you can borrow. In this article, we’ll break down these choices and help you decide if a personal loan is right for you.
If you are facing such a situation, your best bet can be to take a Personal Loan. Below are few explanations for this
Do not check your credit report
Whenever you apply for a loan, lenders check your creditworthiness by collecting your loan report from credit offices. Your credit score indicates how responsible you have been in the past. Typically, banks and other institutions find a credit score over 750 safe. If the credit score of a borrower is below 750, your loan application may be denied. Some lenders use credit risk pricing, where they determine the loan interest rates on the applicant’s credit score. In this scenario, you will get loan deals at lower interest rates with a good credit rating.
Reviewing your credit report before submitting a loan application will also avoid any potential mistake that might lead to the loss of your credit. Make sure that the mistakes are reported to the office concerned and the lender to have the correction completed at the earliest.
Send multiple lenders direct applications
Once you submit your credit requests directly to creditors, credit report requests are initiated by credit agencies to assess your creditworthiness. These applications conducted by the lender will be called hard inquiries and each will be listed in the enquiry section of your loan report. Multiple loan applications will dramatically reduce your credit score within a short period of time.
Instead of making direct applications for personal loans, visit the Financial Market online to compare your credit score, sales and other qualifying criteria and pick the most appropriate lender. Although these markets often receive your credit report from the offices, these requests are considered to be soft inquiries that do not impact your credit rating.
Not compared between different prospective lenders
Given that personal interest rates that vary from 10.35% to 24% p.a., visiting online financial markets is wise to compare and choose the correct loan product and lender based on your loan score, income and other eligibility criteria. Do not limit the reference to the interest rate alone. You must also take into account transaction costs, advance payment costs and other relevant terms and conditions before zeroing in on a given lender.
Ignoring your willingness to repay
Through computing the fixed income obligation (FOIR), lenders evaluate the repayment capacity, i.e. the proportion that your existing revenues are consumed in debt repayments. Because lenders are usually chosen for borrowers who have FOIRs within 50-60% (including EMI of the new loan), make sure that you select a loan term whose corresponding EMI holds your FOIR within this range. Lower repayment capacity borrowers can choose for a longer repayment tenure to use less EMI. But long term tenure would also involve higher overall interest rates and therefore consider prepaying your personal loan whenever surplus funds are available. Make sure that the net reductions in interest rates are considerably greater than the prepayment charges imposed by your creditor.
Do not find alternate options for loans
Don’t forget alternate loan choices, such as loan options for secured loans like home loans, securities loan, property loan and FD loans. Unlike personal loans, these loans do not have end-use limitations and typically have lower rates of interest and longer term than personal loans. For example , existing home loan lenders can generally opt for supplementary home loans that are available at interest rates as low as 8 percent p.a. And tenure that, depending on the residual house loan tenure, can go up to 30 years. Similarly, those with large long-term deposits may find the availability of securities loans to cover their financial shortfalls without selling their securities at low interest rates.
You can merge the whole debt into a single individual loan if you juggle multiple loans or monthly reimbursements. One of the positive things about a personal loan is that you do not have to announce the intention of your loan. You can borrow enough to repay all unpaid debt depending on your qualifications. You won’t fight with multiple payments in this way. You’ll have to pay off a single EMI.
Low interest rate
Personal loans interest rate can be fixed or floating. You should speak to your bank representative and select a rate that is lower than your current refund rate. You can be given a appropriate interest rate on the basis of your qualifications and your credit score. Floating interest rates will substantially reduce the amount of interest paid back.
The amount of personal credit can be charged within 4 hours after one request within 10 seconds . Personal loan repayment is in fixed monthly installments, EMIs. You should choose a term that matches you, and you can pick a monthly rate that is easier to pay back. This will help you quickly clear your outstanding debt while allowing you to be paid a fixed amount for a certain tenure each month.
Personal loans can be a useful tool to meet a range of monetary needs. In high levels of debt, you can choose to borrow more money as personal loans and reimburse it stress-free via flexible reimbursement schedules. You can also use EMIs per lakh starting at Rs. 2187.