The economic downturn in the country has been quite evident with the rate of unemployment, shrinking GDP, and the decrease in annual revenue due to restrictions in mobility.
- According to recent data disclosed by the Government, India’s GDP reduced by 7.3% in the last two years, owing to the health crisis and lower disposable income.
In such circumstances, managing basic expenses becomes difficult for both salaried and self-employed individuals. Unsecured loans like personal loans can be an ideal borrowing option to deal with financial emergencies.
However, before involving in any liability or investment, one must go through all the associated aspects.
Things to keep in mind before availing of an unsecured loan
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Besides helping meet monetary crises, personal loans have always been an effective source of funding for intending young borrowers. The easy accessibility and no end-use restriction make it an ideal borrowing option for young professionals.
However, certain borrowers do not follow critical aspects that make borrowing affordable. Therefore, besides knowing how to apply for a personal loan, borrowers must learn the factors listed below to ensure a hassle-free borrowing experience-
- Assess your needs and choose loan amount wisely
Before planning to apply for a personal loan, individuals must make a list of their requirements and prioritise them. Depending on one’s requirements, the loan amount can be borrowed. Usually, borrowers tend to over-borrow due to the no end-use restriction feature of such loans. This creates an unnecessary burden on the borrower.
In this regard, individuals must not forget to evaluate how much they have to pay throughout the tenor. Therefore, by assessing the repayment capacity and overall expenses, individuals must choose a personal loan that fulfils one’s requirements without stressing his/her finances.
- Compare interest rates
One of the crucial factors to determine when applying for a personal loan is the interest rate. Intending borrowers must conduct thorough research and compare the available lending rates in the market. This is one of the essential components to consider as it can significantly impact the EMI of the loan amount.
Therefore, to ensure affordable EMIs, individuals must compare the interest rates offered by various lenders in the market and choose that suits their repayment capacities. Apart from seeking competitive interest rates, individuals must learn about the factors affecting personal loan rates and proceed accordingly with the borrowing.
- Check credit score
A credit or CIBIL score indicates a borrower’s repayment capability, creditworthiness, and overall financial well-being. Usually, this score ranges from 300 to 900, and if the score is higher, the chances of loan approval also increase. Moreover, with a higher score, one can negotiate with the lender for better interest rates.
In addition, CIBIL score is important for personal lending as the total sanctioned amount highly depends on it. So, one must try to maintain this score to ensure quick loan approval at affordable loan terms and rates.
- Check eligibility and documentation
Although eligibility parameters vary across lenders, individuals need to meet these parameters to acquire their preferred loan amount. Before applying for an unsecured loan, individuals must meet the eligibility parameters and submit necessary documents to the lender.
Here are some of the basic personal loan eligibility criteria that borrowers need to fulfil to ensure quick approval:
- Age should be between 21-67 years
- Must be a salaried employee in a reputed MNC or private organisation
- CIBIL score should be 750 or above
Besides, borrowers need to provide certain documents that include –
- KYC documents
- Bank account details
- Employee ID card etc.
- Check repayment options
It is wise to consider existing financial obligations before opting for another loan. This involves monthly expenses and EMIs. Ideally, having a flexible repayment schedule allows borrowers to manage finances effectively and in a hassle-free manner. In this regard, reputed financial institutions like Bajaj Finserv extends flexible repayment tenor of up to 60 months. Besides, borrowers can also enjoy the advantage of digital application process for prompt loan disbursal.
Moreover, such lenders also extend pre-approved offers on a range of financial products, such as business loans, personal loans, credit cards, etc. Such offers significantly minimise the hassle of extensive documentation and save time. Therefore, existing borrowers can check their pre-approved offers by mentioning their names and contact details.
- Consider additional cost
When opting for a loan, one must check the hidden costs associated with it, such as processing fees, penal charges, prepayment and foreclosure charges, etc. This aspect relies on the credibility of the loan provider. Since such charges can significantly increase the borrowing cost, one must get a disclosure beforehand to avoid additional burdens in the long run.To conclude, now that borrowers know what to check before obtaining an unsecured loan, borrowers can use these pointers as a comprehensive guideline to select the best loan offer. Moreover, it is also essential to choose a lender whose terms and conditions suit one’s requirements.