A Personal Loan can be obtained to serve different financial purposes like funding your child’s education, loan consolidation, debt repayment, medical emergency, home improvement, and weddings. A Personal Loan serves as a go-to option when you find yourself in tricky financial situations.
Nowadays, you can apply for a Personal Loan right from your home or office. Banks and NBFCs offer most of their services online, so that it reaches a vast net of customers. However, before you go ahead and apply for one, it’s important that you first understand how to choose and apply for a Personal Loan successfully.
Here’s a simple yet effective step-by-step guide that will help you breeze through the loan application process.
Step 1: Find out your credit score
CIBIL is a credit information company that collects and stores the credit scores of individuals and businesses. The higher your credit score the better are your chances of getting a Personal Loan. A poor credit score can result in higher interest rates or even rejection of the application. If you have a bad credit score you can fix it by repaying accumulated debts or by obtaining extra lines of credit. Either way, make sure you fix your credit score before applying for a Personal Loan.
Step 2: Determine why you need a Personal Loan
Applying for a Personal Loan is very easy and it can get sanctioned within a few days. But, before you sign up for a loan, it’s important to know why you need one in the first place. Can you meet your financial need with the help of your savings? If yes, then taking a loan and paying high interest charges is not a feasible option. If you have invested your money in fixed deposits, you might not want to withdraw funds before the FDs mature. In such a case, a Personal Loan is your best bet.
If you absolutely can’t do without a Personal Loan, determine the exact amount that you need. It’s always advisable to keep a loan amount as low as possible so that you pay minimum interest charges with ease.
Step 3: Choose a loan for your needs
Research Personal Loans offered by different banks and NBFCs and zero in on the one that suits your needs the best. Also, a wise decision would be to compare tenures and rate of interests offered by different financial institutions. Ideally, you should always opt for a Personal Loan that has a low rate of interest so that the loan doesn’t strain your monthly budget. Shop for Personal Loans and choose a lender who will allow you to borrow for less.
However, someday, you might want to clear the debt as soon as you have extra funds to do so. If so, opting for a shorter tenure would be better in theory but that would mean higher interest rates. So, when fixing the EMI for Personal Loans, make sure to decide on an amount that you can easily repay from your monthly income.
Step 4: Ensure you approach a reputable lender
While looking for a lender to obtain a Personal Loan, always ensure you protect yourself from scam artists and other vulnerabilities. Approach reputable agencies or lenders after going through third party reviews. Always check for the legitimacy of an online lender; and while applying for a Personal Loan ensure that your internet service is secured. It is best to avoid public networks while filing your application and uploading documents online, since the connection you use might not have security.
Step 5: Finish the online application
Once you’ve chosen a reputable lender and a Personal Loan that meets your needs, processing becomes simple.
You just need to fill in the online application form, and it’ll be immediately sent in for approval. If it’s a reputable organisation, the loan approval will only take a few hours if not minutes. Once your loan amount is sanctioned, read and understand the terms and conditions of the agreement thoroughly. Ensure that you can meet all the required terms of repayment and be aware of the consequences in case you default. An unsecured Personal Loan is easy to obtain, but if you default you will have a bad credit score and might even need to pay penalty charges.
Step 6: Keep your documents ready
Once your loan application is approved, the lender will ask for certain documents to be filed. This includes address and identity proofs, employment details, and recent financial statements. Some lenders will allow you to upload these documents online while others will send a representative to collect them from you.
When you’re shopping for Personal Loans, choose one that is within your repaying capability, which can be accommodated into your monthly budget easily. With the right tenure and rate of interest, a Personal Loan will be able to meet all your financial needs instead of adding to your monetary woes.