A personal loan is undoubtedly one of the most utilized and popular financial products among the customers. Provided by banks and financial institutions, any individual can opt for the personal loan without pledging any security to the lender. The lender provides you a repayment period within which you will need to pay the loan amount back with interest charged on the amount. Personal loans can be taken for both short-term and long-term financial needs such as buying the latest smartphone or funding your child’s education or marriage, etc.
But since there are so many options when it comes to the lenders, the confusion is bound to happen. That’s why it is important to choose the best personal loan for you. And in order to do that, you should ask some important questions to yourself so that you can make the best decision. In this article, we will be covering all those questions that should be asked and answered so that you can opt for the best personal loan according to your requirement and repayment capacity. So, if you want to know more about it, keep reading!
Choose Affordable Interest Rates
Personal Loan Interest rate is one of the most important things that can affect your repayment amount. Let me tell you why? You repay the loan via Equated Monthly Installment (EMI) that consists of a portion of both the principal and interest amount. So higher the interest rates, higher would be the EMI Amount. Usually, Personal Loan interest rates range from 11% to 20% per annum and depend on a lot of factors such as your age, employment type, employment history, monthly income, residing city, and Credit Score. Based on these factors, interest rates tend to change from one lender to another. So, choose the one that is within the repayment capacity of yours.
Required Loan Amount
Before opting for a personal loan, you must make up your mind about how much money you need from the lender? Because usually what people do is they opt for a loan amount much above what they need and then they start missing the repayments and end up hurting their credit score. The minimum and maximum loan amount changes from one lender to another and to have an estimate of your repayment capacity, you can use the Personal Loan EMI Calculator by which you can know what will be the EMI amount for your required loan amount. After this, you can make a better decision.
Loan Tenure that you should Opt
Lenders provide a maximum of 5 years as the repayment period that you can choose according to the repayment capacity and convenience. The loan tenure directly affects your repayment amount (EMI). If you choose a longer tenure, your repayment amount will be small and vice versa. But you will also pay more interest in choosing a longer tenure as compared to choosing a shorter tenure where the EMI amount will be higher but the interest outgo will be lower.
Eligibility Criteria
Before opting for a personal loan from any lender, you need to pass the fixed eligibility criteria set by the lender which changes from one lender to another. So, you need to keep this in mind too. The eligibility criteria contain factors such as age, monthly income, residing city, employment type, job history, and most importantly, credit score. Credit score plays a huge role in determining your eligibility. A good credit score indicates your creditworthiness and repayment behavior. So, lenders are more likely to provide personal loan to borrowers with good credit scores.
Existing Obligations
If you are not in some urgent need of funds then you should clear all your existing obligations such as credit card dues and loan EMIs. Existing obligations can hurt your repayment capacity as you are already paying EMIs. To get the desired loan amount, you should clear all your dues.
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