7 Key Points to Follow While Taking A Personal Loan
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7 Key Points to Follow While Taking A Personal Loan

7 Key Points to Follow While Taking A Personal Loan

posted on 2020-06-02 05:45:24 by Admin

7 Key Points to Follow While Taking A Personal Loan

Personal Loans are suitable to fulfill your required financial needs. With a simple and quick process, you can get a personal loan within 24 hours. To get the best personal loan, you must keep in mind important metrics for the application. It will help you to get a personal loan at a low-interest rate from your lender.

So, while planning to get a personal loan, you must avoid the common mistakes that borrowers often do. With the smart planning of your finances, you can save on interest and other processing fees. Here are 7 key points that you must follow while applying for the loan.

7 Key Points to Follow While Taking A Personal Loan

Applicants while applying for the personal loan must follow some important points. Being a little cautious and careful will help to get the right loan for your needs.

#1. Check Your Credit Score

As a personal loan is an unsecured loan, it does not require collateral. So, the only way to check the borrower’s creditworthiness is the credit score. So, to avoid a high-interest rate, you must make sure that you have a good credit score. With a 750+ score, you are on the safer side. On the contrary, the applicant with a low score may get the loan but at a higher rate.

As banks follow the credit risk pricing, which adjusts the interest rate as per the credit score of the borrower. Also, review your credit score report to prevent any possible error passed on by the lender. In case of any error, report to the concerned bureau as soon as possible.

Thus, always check your credit score before applying for the loan. You can continuously work on to improve your CIBIL score to 750 and more.

#2. Compare Different Personal Loan Plans

Many banks and NBFCs offer various personal loan plans. Which differs in terms of the interest rate, repayment tenure, and other costs associated with the loan. So, to get the lowest interest rate, you must compare the plans of different financial institutions.

You need to list down the total cost of each plan and shortlist a few plans as per your need. Also, check which bank is offering the best terms and conditions or offering the same loan at a low cost.

Also, you can rely on the bank with which you have an existing relationship in terms of an existing account, salary account, or fixed deposit. Since the bank already knows your financial history, it can lend you the loan faster at the best rates.

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#3. Do not Submit Multiple Loan Queries

If you submit a loan applicationin multiple banks at one time, then all will be added in your inquiry section of the credit report. This will affect your credit score as it will get listed in the inquiry section of the report. These hard queries will appear as a borrower desperate for the loan. So, as advised, apply for only 2-3 financial institutions at a time.

In place of submitting applications in multiple leading institutions, check and compare the plans online. As these will be listed under soft queries and will not affect your credit score.

# 4.Choosing the Right Tenure

While applying for the personal loan, you must check the personal loan repayment tenure. Choose the plan as per your monthly EMI repayment capacity. You may like to have a shorter tenure to pay your loan as soon as possible but it will lead to higher EMIs. Similarly, longer tenure will lead to less EMI but more interest. So, use theEMI Calculator to check the monthly EMI. Choose the loan repayment tenure such that it does not add a financial burden on you.

#5. Preparing Budget

While applying for the loan, apart from interest rate and personal loan, you must plan the loan amount you need. Prepare a proper budget for the loan amount you need. Do not take the loan more than you need. Check your primary sources from where you can arrange the funds, only after then apply for the loan. This way you can save the cost of the personal loan.

Read:How to Manage your Finances during COVID-19?

#6. Ask for Processing Fee and Other charges

Apart from the interest rate, most lenders levy the processing charges. So, before applying for the loan, ask the lender about the other cost associated with the loan. The lender may apply costs like EMI bounce charges, maintenance charges, or high foreclosure penalties. Only after research for such details, apply for the personal loan to avoid high cost.

Also, in need, do not sign the documents without reading the fine prints. Read all the terms and conditions carefully. Check if part payment or pre-closure option is available for your loan plan. Before the final agreement, clarify all the doubts you have.

#7. Keep the Documents Ready

While applying for the personal loan, you must keep all the documents ready. This will help you to fill the form fast whether you are applying online or offline. For the online process, it is better to keep the scanned copies of the documents. So that you can easily upload them whenever required. The list of documents often required are given below.

List of Important Documents

  • Salary Slips (last 3 months or more)
  • Salary Account Bank Statement (last 3 months or more)
  • Identity Proof (PAN / Aadhar / Driving License)
  • Resident and Permanent Address Proof
  • Passport Size Photograph

This is the list of the documents that must be kept ready. You may be asked for more documents as per your lending institution policy.

Conclusion

So, there are many things that a borrower must take care of while taking a personal loan. This is the list of do's and don'ts to follow while taking a loan.

Do’s for taking a Personal Loan

  • Check Offer from your current banker
  • Check your credit report
  • Take Advice from your family and friends
  • Check all the credit options in the market
  • Read all the terms and conditions of your loan
  • Compare the loan plans to get the best rate

Don’ts for Taking a Personal Loan

  • Do not blindly opt for EMI, use EMI Calculator
  • Do not try to hide your all loan details to the lender
  • Focus not only on the interest rate but also on other factors
  • Do not apply for multiple lenders simultaneously
  • Do not forget to check eligibility criteria on your loan

Apart from personal loans, you can check out alternative lending options. You can opt for a line of credit or secured loans. In case of a secured loan, you can opt for a loan against property, top-up home loan at low interest, and longer tenure. Look for different options before the final application submission of the loan or any other financial product.

To apply for personal loans, home loans, business loans, credit cards, visit Loanadda.com. Best assistance and guidance is just one call away.

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