When a borrower approaches any financial institution for a loan for a shorter term, no obligation to offer any collateral based upon the borrower’s creditworthiness is termed a personal loan. Here, a financial institution sanctions a loan of a borrower and credits the loan amount to the borrower’s account. Thereafter, the borrower repays the principal and interest in monthly instalments or known as personal loan EMI.
Before applying for a personal loan, there are certain factors that need to be considered:
- Eligibility Criteria of Lenders
Every lender’s personal loan eligibility criteria can differ from one another. In such a scenario, a lender that holds eligibility criteria that is not stringent and easy-to-meet can be a good option. This factor can also help to avail an instant personal loan when a fund is required at the last minute.
Furthermore, many financial institutions have a tie-up with renowned organisations to provide loans to their employees without any hassle and based on the company’s goodwill. This approach can benefit a salaried person from such an organisation to apply for a personal loan in those institutions.
In terms of documentation, in the case of a salaried person, one needs to show the latest salary certificate of the organisation they are working at and bank statement for the last three months. For self-employed professionals and businessmen, an income tax return for the last two years is mandatory to show.
- Compare Different Interest Rate
Many lenders in the market offer different personal loan interest rates. These interest rates are based on the loan amount, credit score, and repayment ability. A borrower should check all permutations and combinations using a personal loan EMI calculator. It will help you compute the EMI to be paid.
While a borrower seeks to avail a personal loan, the interest rate has to be scrutinised since it contributes largely to the actual amount a borrower will pay during the loan term.
- Check Repayment Flexibility
Flexibility in repaying the total loan amount can enable a borrower to pay as per one’s own convenience and affordability. By doing so, the EMI can be broken down so that it will suit the borrower’s budget and avoid any default circumstances.
- Inquire About Additional Charges
Various additional charges are associated with a personal loan, such as processing fees, prepayment charges, penal interest, and secure fees. These charges should be checked with the lender, as when charged, it might be more than a borrower’s anticipation.
The above factors will guide you to choose a personal loan offering that suits your requirement. So, don’t. Wait. Apply for personal loan, today.