Top things to know when availing a personal

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Top things to know when availing a personal loan
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What is a personal loan?

• A personal loan is a short-term loan that can be
  availed to meet short term cash requirements
  without having to offer any collateral. This type
  of loan is unsecured and is offered based on your
  credit eligibility and credit score. Not
  complying with the eligibility criteria of the
  lender can lead to rejection of the loan or
  approval of the same at high interest rate.
• The personal loan amount can be used for variety
  of purpose ranging from home renovation, funding
  of medical expenses, payment of education fees,
  wedding expenses and others.

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Your credit score is important

• Your credit score represents your repayment
  history and your creditworthiness. This score
  ranges from 300-900 with 300 being the lowest and
  900 being the highest. Usually, a score of 750 is
  considered to be an ideal score for availing a
  loan in India.
• A low credit score is considered to be a sign of
  bad credit behaviour and poor financial
  management. Additionally, lenders offer personal
  loans at high interest rates to applicants with
  low credit score.
• Therefore, having good credit score is important.
  To maintain a good credit score, it is essential
  you pay off all your dues on time and dont have
  any outstanding limit on credit card.

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Interest rate

• Personal loan is an unsecured loan that does not
  require you to keep any collateral or any
  guarantor. Due to this, the interest rate on
  personal loan is high in comparison to other
  types of loans. This is because the lender does
  not have any guarantee of getting the loan amount
  back.
• Additionally, availing this type of loan requires
  you to comply with the eligibility criteria
  mentioned by the lender. To get the best deal on
  interest rate, it is better to compare personal
  loan interest rates online.
• You can apply for this type of loan either at
  fixed interest rate or flexible interest rate.

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Penalty charges

• In case if you are unable to pay the EMI of your
  personal loan on time, then a heavy penalty would
  be charged towards late payment. The late payment
  charges vary from lender to lender and it is
  significant that you check on this amount as you
  may end up a hefty charge instead.
• Additionally, check on the pre-payment penalties
  as early repayment prevents the lender from
  earning interest which is why they charge a
  pre-determined foreclosure fee. Always check on
  the foreclosure charges.

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Compare online

• To ensure you get access to money instantly at
  best interest rate, it is always a good idea to
  compare loans online. This also helps you get an
  idea about the eligibility criteria and
  documentation requirement set by different
  lenders.

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Assess your repayment capacity

• Before availing a personal loan, use a personal
  loan EMI calculator to get an idea of the EMI
  amount you would have to pay each month. Check
  whether you would be able to pay the EMI or not.
  Though banks and online lenders do check your
  repayment capacity at the time of granting the
  loan, however. It is always a good idea to do so
  personally before making a loan application.

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Conclusion

• Personal loans are offered for tenure of 12
  months-60 months and now with digital
  advancement, you can apply for a personal loan
  online in a simple and easy way. Keep in mind the
  above things to ensure you dont end up making a
  wrong decision.