If you are thinking about taking a personal loan, you should definitely research a few key points beforehand. This will help you become a better borrower and treat the loan as a loan, not as a burden.
Will You Get the Loan?
Whether you will get a personal loan depends on several factors. Although personal loans do not require collateral, banks thoroughly assess you before approving the loan. Key factors include your age, income, and credit score. Generally, a salary between 15,000 and 25,000 rupees per month makes you eligible for a loan.
Banks want to ensure that you are capable of repaying the loan and determine the loan amount based on your salary. Loans are typically issued to individuals between 21 and 60 years old, and having at least one year of job experience is often preferred.
CIBIL Score
Before granting a loan, banks check your CIBIL score, a three-digit number ranging from 300 to 900. This score reflects your credit history and repayment habits. A higher CIBIL score, preferably above 750, increases your chances of loan approval. You can easily check your credit score online.
Personal Loan Interest Rate
Before applying for a personal loan, compare the interest rates offered by different banks. Interest rates vary based on the loan amount. The interest rate is crucial because it determines the total interest you will pay on the principal loan amount.
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EMI Relief
Personal loans consist of the principal amount and the interest on this principal. Repayment is done in installments or EMIs (Equated Monthly Instalments). Calculate your monthly EMI obligations before taking a loan. Some banks or NBFCs offer flexible EMI options in addition to standard EMIs. With standard EMIs, you pay a fixed amount every month, whereas flexible EMIs allow you to start with a lower amount and gradually increase it.
Loan Repayment Terms
Check the prepayment terms before taking a personal loan. Some banks or NBFCs impose penalties for early repayment of the loan. This is because banks earn interest over the loan tenure, and early repayment reduces their interest earnings. Find out if there are penalties for repaying the loan early.
Bank’s Track Record
It is essential to check the bank’s track record. Research how long the lender has been in the market, its financial stability, and customer experiences. Personal loans can meet various needs, both planned and unplanned. Therefore, consider the points mentioned above carefully before applying.