Cash-strapped individuals may avail of personal finance from lending institutions in the form of personal loans. These loans have to be repaid over a pre-defined period, also called as loan term or loan tenure and are serviced at a cost in the form of interest rates. Interest rates are the incentive or the profit that the lender receives for making the financial transaction.
A loan is signed by the parties involved, wherein the borrower is bound by certain obligations and restrictions as enforced by the contract.
Factors to consider while borrowing
Loan seekers have to consider numerous factors before signing on the dotted line. It is important to check the total cost of the loan, which includes the interest rate, processing fee, part-payment fee, and other charges. For added convenience, borrowers may even avail of a personal loan online. Additionally, applicants need to research on the various repayment options and chose a flexible plan based on their cash flow. It is also important to check details like loan limits, terms and conditions, besides other crucial information.
Eligibility criteria and documentation
Lenders provide loans to individuals only if they qualify for it. Various considerations on loan eligibility include the applicant’s income, repayment ability, relationship with the lender, and credit score. Financial stability helps individuals avail of loans easily. An applicant has to submit the required documents along with the loan application form. Documents include proof of identity, proof of residence, income proof, and other papers, which may vary from lender to lender.
Tips to land the best deal
The following tips will help you land the best competitive deal that meets your financial needs.
- Research various lenders and their interest rates. Though some may offer a lower rate, inquire regarding the total fees and charges.
- Apply for a personal loan online. The interest rates are lower for users applying through the Internet, as there is no physical cost associated with an online platform. The benefit is passed on to the customers in the form of lower interest rates.
- Choose the right term. While a shorter term may have higher Equated Monthly Installments (EMIs), it generally offers lower rates. If the borrower’s financial position does not allow for a short-term payment, he may opt for a longer term, which entails higher interest rates but allows him to manage his finances through lower monthly EMIs.
- Beware of scammers in the market. Quite often, unscrupulous lenders deceive individuals who are in desperate need of cash. These lenders may either dupe the borrowers or pass on their financial details to other lenders to earn a quick buck.
- If the users have any outstanding debts, paying it off before applying for personal loans online is recommended. Lenders prefer individuals with a clean record as opposed to individuals who have pending debts who are perceived to be high-risk borrowers.
- Lastly, users must ensure that they have a good Credit Information Bureau (India) Limited (CIBIL) score before applying. A high score reflects high repayment ability, thus increasing the chances of loan approval.
Users may avail of a personal loan to meet personal requirements and exigencies. Lenders these days offer various benefits like quick processing, minimal documentation, attractive interest rates, and other benefits to customers. Such advantages are making personal finance a very popular option for individuals seeking funds.