Each one of us has different needs and goals. There are times when our personal needs take priority while there are days when professional needs are at the forefront. But whenever we have to make a large payment for our personal needs, the first thing that comes to mind is a personal loan. The loan is designed to help individuals fulfill their desires without worrying about the lack of funds. No matter the purpose of borrowing, a personal loan will be able to help you in so many ways. It is an ideal option for those who have a payment to make and need immediate access to funds. Here is all you need to know before you apply for a personal loan.
A personal loan has a high loan amount and it will help fulfill your needs. Whether you are borrowing due to a medical emergency, have to pay the contractor for home renovation, or have to plan a wedding, the loan has a high amount and will not require you to borrow from anywhere else. However, before you apply for the loan, it is important to be aware of the purpose of borrowing and the exact amount you need. Spend time working around the requirement of funds and then approach a lender with a specific amount in mind.
2. Interest rate
Different loan products have varying interest rates. Hence, you must compare the same before proceeding with your application. If you find a lender that offers the loan at low interest, you should go ahead with that lender. The rate of interest will be based on the market rates but will also depend on your credit score and repayment history. If you have a poor credit score, you may have to pay a high-interest rate. There are many lenders who offer a loan to poor credit holders but the interest rate is high. You can compare the rate of interest online and then make a decision.
3. No collateral
One solid reason why borrowers prefer personal loans is that there is no collateral requirement. You do not need to provide any assets to get the funds. You can apply for the loan even if you do not own any assets. This makes it easier for a lot of borrowers to make the loan application.
4. No restrictions on end-use
Another reason to apply for a personal loan is that you can use the funds for any purpose and there are no restrictions on it. In many other loan products, the lender has certain restrictions and you cannot use the funds beyond that. For example, if you are applying for a car loan, you can only use the funds to buy the car. You cannot use it to fund the home renovation expenses. But a personal loan does not have such restrictions and allows you to allocate the funds anywhere you want.
5. Income criteria
You must check the eligibility requirement of the lender before you apply for the loan. There are basic criteria but most lenders require you to have a stable source of income. If you do not have adequate income flow, you cannot apply for a loan. Your minimum monthly income should be Rs. 15,000 and you will have to attach proof of the same. If you are self-employed, your business should be in existence for a minimum period of 2 years and if are salaried, you should be in employment for a minimum period of 6 months. The lender will not approve your loan application if you do not prove your income.
Keep these things in mind when you decide to apply for a personal loan. The loan application process is transparent and straightforward but you need to be aware of all the aspects of the loan. Understand the terms and conditions of repayment and read the fine print thoroughly before you sign on it. Timely repayment of dues is very important to build a solid credit score. Only apply for a loan amount that you have the ability to repay. It does not make sense to overestimate your ability and then apply for a loan. It could put you in trouble in the long term.