20 Oct 2019 | 5 min read
Getting a loan is a big financial step, and requires a much thoughtful analysis and planning. The emergency savings may not always be sufficient, to arrange for the funds and hence there is the need for loans.
Personal loans have emerged as the temporary solution to arrange for the finances for an emergency situation as well as for fulfilling one’s aspirations. The digital lending space has enabled easier access to funds, with a growing number of millennials opting for personal loans to enhance their lifestyle.
This also indicates the growing popularity of digital lending which has been on the rise with its ease of services. Personal loan is an unsecured loan, which is not backed by any asset and if it is not managed properly it can do more harm than good. Therefore, before you head to take the big decision of availing a personal loan, here is a list of top essential factors which you should examine:
1. Evaluate your finances
A personal loan might look like an attractive option but if the repayments are not done timely, it can bring down your credit points, making it a worse scenario for you. Prepare your monthly budget of your income and expenditures. You can take the help of EMI calculator to calculate the additional expenses, which you will have to shell out in the form of EMIs. Just enter the loan amount, tenure and tentative rate of interest. A rough figure will be presented in front of you, which will assist you in calculating if it fits into your monthly budget.
2. Check your credit score
A credit score is the first thing a lender verifies, while assessing the loan application. For personal loans the criteria is more stringent as it is an unsecured loan. Credit score shows the eligibility of the borrower, how well he manages the financial aspects. Based on the credit score, the lender try to evaluate if he will timely repay the loan. A borrower with a credit score of 800 and above will qualify for the loan at attractive interest rates.
3. Consider the need and not the eligibility while borrowing
Every other day you might be getting call or email about the pre-approved email in your inbox. Do not fall for the attractive gimmicks, which are part of the marketing strategy by the team. Apply only for the loan amount, which you are falling short of to meet the temporary shortage. Availing higher amount, will eventually lead to higher pay out of EMIs.
4. Negotiate for a better deal
The market for personal loans has become really competitive in the recent years. Almost all the banks and NBFC's are offering personal loan at attractive interest rates. Do not go for the first lender you check out. Along with the interest rates, also compare for the other features such as prepayment penalty, interest/penalty on late payment, cheque bounce charges etc. It is better to go with the one who is offering better features favourable to you.
Festive seasons are a great opportunity to grab the best offers, which lenders come up with. You can leverage the opportunity and avail personal loan at attractive interest rates.
Note : You can download the Afinoz app and shop around for the best lenders offering affordable interest rates for personal loans under one umbrella. You can get a cashback of up to Rs. 5,000, on the disbursal of your loan.
5. Avoid additional offers
Do not fall for the additional offers of accidental insurance plans, which usually the lender tries to pitch in, while selling the personal loan. Such additions will add up to the EMI and increase the pay-out. Simply refuse for such additional plans. Insurance is just an example, but the lender might offer you such others too.
6. Read the fine print
Lenders do not disclose all the details upfront. While signing the loan agreement, make sure to read every detail minutely, which includes hidden fees and charges. If not addressed initially it might lead up to increased costs later. Think about the future finances and act smart in finalizing the deal.
7. Considering alternatives
It is a well-known factor that the interest rates of personal loans are higher as it is an unsecured loan. You can speak to your family and friends or you can liquidate some of the assets, to manage for the temporary monetary shortfall. You will be saved from paying interest rates if you get lucky in arranging for finances from the family members. Make sure to return the amount as agreed upon mutually.
8. Check credibility of lender
While looking for a personal loan from banks or NBFCs, you must have a quick look at their social media and Google Plays Store ratings. It will give the customers a good idea what to expect.
Personal loans are a great resource to bridge the financial gaps in meeting the most important goals. However, it is vital to consider the above-mentioned points before taking the big leap. A careful analysis and an in- depth understanding will ensure a smooth journey, saving you from the mid-way financial hiccups.