There might be distinct reasons to zero in on a personal loan. While you look forward to getting a loan through a digital app like a buddy loan app or a public sector or private sector bank on the current personal loan interest rates, with favourable terms, the comparison becomes very essential. Let’s look at a few parameters that you must consider comparing.
Your repayment potential and credit score –
You must mandatorily maintain a strong credit score for availing a personal loan. Wondering what a credit score is? Your credit score represents your behaviour with credit in the form of your repayment behaviour, maintaining your mix of credit, length of your credit, etc. The credit bureaus collect, analyse and record the details and information of your repayment history and borrowing with lenders or banks.
- Credit report is a way to understand your credibility as a borrower of a loan. The length and record of your credit behaviour with other types of debt endow the lender with a precise idea about your behaviour in the future.
- Alongside your credit history, lenders even review your repayment potential. If you hold a higher disposable income, with lower financial liabilities, then the chances of availing the loan approval are higher here.
- You must come across as a borrower, who is responsible and who can repay loan EMI on time. You must even come across as an individual who is sure how you can repay the personal loan without delaying or missing out on the repayments.
Thus, to get a personal loan, it is advised for you to hold a credit score of over 750. Also, you must have a good repayment potential. These will ameliorate your chances of qualifying the critical criteria that financial institutions consider regarding you as an applicant.
Also Check: Current Personal Loan Interest Rates
Beware of the borrowing amount –
You as an applicant are expected to be aware of how much you require exactly as per your need. When you suggest the exact amount, financial institutions tend to find it way more favourable to disburse the loan instead of disbursing to someone who is not aware of the required loan proceeds.
Purpose of availing the loan –
Alongside the amount, do ensure to communicate the reason why you require opting for the loan, while it is not mandatory. A major fact that financial institutions must determine is whether to provide a loan or not, a reason to endow the lender with an idea of the risk level that they are taking in offering you the loan proceeds. Additionally, you tend to look highly genuine relatively.
If availed for business reasons, display the spending pattern –
A personal loan may be opted by you if you are a businessman to build your new business or purchase a new machine or asset for your prevailing business or by salaried to mitigate the financial requirements. When you communicate with the financial institution regarding your plan to buy an asset that would endow you with a higher return in the future, the financial institutions are highly satisfied in lending to you. So, in the case, you endow the impression of becoming a good candidate with a strong credit score and you hold a strong reason which explains how the loan will assist you to make gains, the lender might even approve your loan proceeds at flexible loan EMI repayments.
Potential to repay the EMI per month –
The actual loan EMI will obviously be based on the loan repayment tenure you select. A higher repayment tenure would result in small EMI amounts and vice versa. However, a higher repayment tenure tends to result in a higher interest constituent eventually making your overall loan availing expense very high. The major reason here is the interest is computed on the overall amount that you must repay. Thus, ensure you work on your plan of determining what EMI scheme will match you the best.
Shop around for a prudent loan offer –
This is one of the underrated measures among many planning to opt for a loan. Multiple financial institutions endow personal loans. Now, consider the financial institution that offers you the loan at a low rate of interest and has suitable terms and conditions. As most financial institutions come with likewise types of terms, still there may be variations where a few financial institutions levy fewer charges and might have friendlier terms and conditions. Thus, ensure you shop around before you zero in on a specific lender.
Compare the rate of interest –
Compare the rate of interest of distinct financial institutions that you may find, are reliable completely to get a credit. A few financial institutions might levy an interest rate of anywhere between 10 and 26 per cent. While you must factor in lower interest levying financial institutions, it is crucial for you to first go through the terms as well as conditions with the major view to avoid levying additional expenses in the future. One of the prudent ways to do so is to check out the interest rates and offers on personal loans on the lender’s official site.
Other fees and charges –
Banks generally levy a minor amount of charge when opting for a loan. There are distinct kinds of fees a lender might levy, right from prepayment fees to late payment fees, processing charges, cancellation fees, cheque bounce fees and others. Ensure the expense does not go over 3 per cent. Next, you must ensure to compare distinct top banks providing loans at an affordable interest rate.
Flexibility in making the repayment –
Financial institutions endow distinct repayment options on a personal loan. But a high repayment tenure would endow payment of higher constituents of the rate of interest. Additionally, if you are looking to pay early or in the case you fail to pay timely, financial institutions levy a few amounts of charges on the loan closure. To avoid witnessing enormous expenses, it is best that you compute the affordable repayment tenure as per your repayment capacity.