Your phone buzzes or you get an email pop-up saying you have a pre-approved loan facility. Isn’t it common these days? It certainly is a clever marketing strategy to make sure that you click on the link mentioned in that text or email. These kinds of messages flood your inbox throughout the day, but you must consider your need when you apply for a personal loan.
Sometimes there may be emergencies where availing a personal loan can be the last resort. That is when one should opt for a personal loan. While you apply for a personal loan, a few crucial questions should be assessed by every applicant. Evaluation of these questions helps in selecting the most effective cost loans for yourself.
Let us quickly run through the questions that you should be asking yourself while you apply for a personal loan-
What is a personal loan?
A personal loan is a form of borrowings that are not sought for any purpose in particular.
The utilization of such funds is not restricted and can be used for reasons like funding an emergency or relaxing on vacation. There are fixed rates of interest for such loans that differ among the various lenders.
How to apply for a personal loan?
The process is more or less the same for the different lenders. You can visit the nearest branch of your lender or even over the telephonic services if available. With the digital space growing leaps and bounds, one can apply for a personal loan via the online facility too.
Are there different types of personal loans?
Yes, there are two types of loans, namely a secured and unsecured loan. A secured loan is guaranteed by collateral. This collateral can be an asset which the lender can obtain ownership of in case of default by the borrower. Personal vehicles, jewellery, or other personal properties can be used as collaterals.
Another type of loan is an unsecured one where there is no requirement for any collateral against the funds borrowed. Such unsecured personal loans are based on your income, credit score, any pending debts due to the lender, and availability of credit.
What is my credit score?
A credit score is a measure used by the lender to determine your loan eligibility. The higher your credit score, the better it is. Generally, higher credit scores increase the chances of the full amount of loan applied for. You can check your credit score before you apply for a personal loan on payment of a nominal amount of fee. Analysis of the credit score helps you in getting a better understanding of the various debts having an impact on it.
How are my Finances?
Knowing your financial health helps in analyzing whether you can repay the amount so borrowed. A thorough analysis of your annual income and expenses helps in determining the serviceability of the debt. You sure do not want missed deadlines in repayments as they attract a hefty penalty.
How much should I borrow?
The most vital question to address when you apply for a personal loan is how much to borrow. This question should be addressed, keeping in mind your need and creditworthiness. Availing an amount that you are confident enough to pay is what you should borrow. This saves you from the hassle of using up the available credit limit.
How long will it take to pay off my loan?
Personal loans are available for different tenures. It is important to evaluate your capacity to pay the loans and select a tenure comfortable enough in which you can repay your loan. The tenure serves as an important factor in the determination of equated installments for each defined period.
What is the rate of interest?
The interest on your loan is an essential factor in determining the affordability of your loan. It determines how cheap or dear a loan will cost to the borrower from among the different lenders. Lenders often charge different rates of interest for different borrowers depending on their creditworthiness.
These are the few questions that can help you in deciding the terms and conditions for your loan. Make sure you read the fine print on your loan agreement keeping in mind the various charges, fees, and penalties. Lastly, make the best use of your personal loan to fund your needs. Select wise and choose the best!