Top 7 Things To Consider When Choosing A Personal Loan
A Personal loan is an unsecured loan that individuals take from a bank or any other non-banking financial institution. People opt for this loan to meet their personal needs. Personal loans are promptly approved and disbursed and obtained easily. It requires minimal documentation. Moreover, it doesn’t even oblige any collateral or security.
The funds are easily used for any legitimate reason. However, just like any other loan, it is required to be paid as per the terms laid down by the bank. Find more information about the personal loan at kbbcredit.sg.
Several factors are combined to check whether an individual is eligible for a personal loan or not.
- Age – Individuals aged between 21-60 years are eligible to opt for a personal loan.
- Profession – Salaried individuals working either in an MNC, a private company, or a government company. Self-employed professions like Doctors, CA, CS, etc. are all eligible.
- Income – Salaried people should have a monthly income of at least Rs. 25,000 and the professionals should have annual gross receipts of Rs. 5 Lakhs or above.
- Work Experience: A minimum of 3 years of work experience is required.
- CIBIL Score: The person should have a minimum CIBIL score of 650.
If you are planning to obtain a personal loan, consider these 7 points before choosing a personal loan:
1. Check The CIBIL Score Before Taking A Loan:
Before applying for a personal loan, you should check the CIBIL (CIBIL) score. The interest rate on a personal loan is determined based on your ability to repay the loan because the rate of interest increases if the savings are less in proportion to your expenses.
If your credit score is high, then the bank charges you a higher rate of interest. If you are unable to repay the loan’s EMI, then your credit concerning repaying your loan decreases. There are monthly, half-yearly and annual fees for checking the CIBIL score.
2. Processing Fees:
The bank takes processing fees to process your loan application, due to which there is competition among banks. Private banks take more processing fees than government banks. Check before taking a personal loan. Banks do not take processing fees on festivals or other occasions. Banks continue to advertise regarding this policy. You should check in this regard before taking a personal loan.
3. Take Personal Loans Only When Required:
Taking more loan increases your EMI and repayment period, due to which the interest burden has to be borne more. In the financial sector, it is said that banks charge the highest interest on personal loans.
A personal loan is secured and unsecured, as relatively few documents are required to be submitted for taking it. Banks often charge interest at the rate of 24 percent per annum, depending on the individual’s savings situation. The interest rate is not the same for all banks.
Multiple loans applications don’t have a good impression of you, and it creates your image as credit-hungry. It makes a person high-risk application, thus compelling lenders to cancel your request. Before applying for a personal loan, you must decrease your present outstanding debts.
With multiple credit cards and loans on your name, getting approval for the sanctioning of another loan is difficult. Hence, repay them as early as possible and bring outstanding debts down to 50% of your total income.
4. Determination Of The Interest Rate On The Personal Loan:
The bank determines the rate of interest-based on the annual period. So the bank imposes a charge on depositing the loan before the period. There is also a possibility that the bank will not levy charges on paying interest first, but the bank anticipates the annual cost that will be incurred on loan.
5. Pay On Time EMI:
Pay the EMI of a personal loan on time. If you do not do so, your credit score may deteriorate, and in the future, you may have trouble getting a loan or getting a credit card.
6. Check Your Personal Loan Eligibility:
Check your personal loan eligibility with the help of a personal loan eligibility calculator. It helps to determine the maximum limit of personal loans that you can opt for. This is done considering the repayment capacity of an individual and monthly income.
Put in in the loan eligibility calculator requirements and know the loan limit you are eligible for. A person close to his/her retirement is not eligible for a Personal Loan of 5-year tenure. Income is one of the essential factors’ lenders consider before sanctioning a personal loan. Hence, you must reveal every source of income to them and not just the salary.
7. Using An EMI Calculator Is A Must:
A personal loan EMI calculator is the most essential tool when it comes to a personal loan. It is the most appropriate source of funds as there aren’t any conditions for how the amount is used. Banks also permit high amount to be borrowed. So, you can get confused about how much amount you should borrow. This calculator helps you out to decide the amount.
This calculator is used to get an idea of the monthly installments you will have to pay for the personal loan that you are planning to take. You have to consider the amount of loan, rate of interest, tenure, and the EMIs before taking a loan.
The formula used for calculating the EMI is:
E = P x r x (1+r)^n/((1+r)^n – 1)
E is the EMI amount to be paid,
P is the amount of loan,
r is the rate of
n is the tenure(in months).
Do not take a personal loan unless in the event of inevitable emergencies. Also, read the terms and the conditions properly before signing on the dotted line in the terms and conditions page. Also, do not just judge based on the rate of interest. You need to primarily consider the total amount which you need to repay.
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