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Top 11 Questions to Ask Yourself Before Taking a Personal Loan
Personal Loans are popular largely because of their key feature - flexibility. It provides flexibility in terms of repayment, tenure, and use. Moreover, financial institutions offer these loans without asking you to put any assets as collateral and all of this has led to an increase in the number of people turning to Personal Loan in recent times.
When you need funds urgently and without worrying about any collateral you can get a Personal Loan. Personal loans are very popular. However, the borrower must have complete clarity about the Personal Loan. This is important so that you do not face any unpleasant surprises. It may take time to examine all the terms and conditions in detail, but it is an important step towards a healthy financial future.
However, before applying for personal loan, you need to ask yourself some questions which are given below.
If you are faced with an urgent requirement for funds to fulfil some of your immediate needs, a Personal Loan is the best option. Borrowing funds from a lender means that you are bound by certain terms and conditions. That means you must put a portion of your future earnings into meeting your monthly debt obligations. If your income is limited and you do not see any improvement in your financial situation in the future, then it’s not a good idea to apply for a Personal Loan as it will put pressure on your budget.
Before you finalize your decision to get a loan, consider the options available. If you are expecting a festival or performance bonus from your employer, it is better to wait. Similarly, if your investment is reaching maturity and you will receive a large sum out of it, use it instead of taking a loan.
Financial institutions evaluate your credit report. If it is in bad shape, they will refuse to give you a loan. And if not, they will charge you a higher interest rate to cover any potential default risk. Therefore, reviewing one's credit score should be the first thing to do before applying for this loan.
In India, individuals earn through various sources. However, they do not have any documents supporting their income. Financial institutions are not only interested in your income but are also keen to check if you are consistently earning.
If you are new to your job, spend some time at your existing organization and don't forget to request your employer to share the salary slip to your email address every month.
It entirely depends on your credit profile. If your income is insufficient to meet the lender's minimum eligibility criteria, adding a co-applicant may work in your favor. However, if you do, keep the following two conditions in mind.
To find the answer to this question, use the Personal Loan EMI calculator. It will help you determine the EMI value. In addition, you can use this tool to compare different lending institutions.
Many lenders offer Personal Loans at attractive rates and attractive features. Sometimes it is tempting to accept a Personal Loan using an instant loan application from your mobile phone that claims to offer the best possible deals. But you need to know who is offering you credit. It is advisable to go with a lender registered with the RBI, which has a large physical and digital presence and strong technical support. It is also important to carefully read the terms and conditions before signing any loan agreement so that you know exactly how much EMI you must pay and for how long.
To answer this question, review your current financial commitments. Make a checklist of all the expenses. Below are some of the costs that you can't ignore.
Use a Personal Loan EMI calculator to select the ideal term. The term of the loan is directly related to your interest rate and EMI. When you choose a shorter term, the EMI goes up, but the interest rate goes down. While the EMI decreases in the long run, you will still pay a higher interest component.
Some Personal Loan lenders charge prepayment penalty/foreclosure charges. This is a fee charged by lenders if you want to repay your loan early or transfer the balance of your current loan to another lender. Personal Loans also come with additional charges that are higher than the interest rate. Some of these charges include processing fees, service fees and insurance fees. It is important to check the fee before you sign up. Penalty charges may also be levied in case of check bounce or late payment.
This question comes up when you do not meet the minimum eligibility criteria of the lender. As a result, you keep your assets as collateral to ensure that the lender's funds are not lost in the event of a default.
Getting a Personal Loan to fulfill your diverse needs is always considered one of the best options. But before you opt for it, carefully considering these 11 essential questions is crucial. It ensures that the loan aligns with your financial goals, values, and ability to repay. By making an informed decision, you can avoid unnecessary debt and use the loan responsibly to achieve your objectives. Remember, a well-thought-out loan can be a valuable financial tool, empowering you to take charge of your financial future.
We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Personal Loan disbursal is at the sole discretion of Poonawalla Fincorp.
*Terms and Conditions apply
Our team of expert writers and editors are passionate about providing authentic and valuable information on finance. Our aim is to simplify financial and finance-related concepts. We strive to help our readers become more aware and empowered to make informed financial decisions.
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