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personal loan apply online
personal loan apply online

Things to check before applying for personal loan online

It is natural to think about a personal loan when you are in need of funds. Taking personal loans in India is a simple and hassle free process. With a rise in digitisation and growing awareness about the loan, there is a surge in the applications. But the number of options available in the market can easily confuse anyone. Personal loans are nothing but unsecured loans that you can obtain if you have a consistent source of income. Here is a checklist to help you when you proceed with personal loan to apply online.

Choose low interest rate

The rate of interest plays a huge role in the loan. It is a part of the total cost of borrowing and the EMI amount includes an interest component. Since the personal loan is an unsecured loan, the interest rates could depend on your credit score and repayment history. They will vary from one lender to another. It could be as low as 11 percent and can go as high as 20 percent. Before you apply for the loan, it is essential to compare the interest rates and choose a lender that offers the lowest interest rate. You can do this online. Even a minor difference in the interest rate will reduce the overall cost of borrowing. If you apply for a loan with the lender you have already have a relationship with, you will be able to enjoy a lower interest rate.

  1. Consider other charges

Besides the interest rate, there are other charges that the lender will apply on the loan. You must consider them too. Ensure that there are no hidden costs or charges you aren’t aware of. An important charge is the processing fee that ranges between 1 percent to 3 percent of the loan amount. Sometimes you will get a discount on the fee and in some cases, there could be zero processing fee. You must also consider the pre-payment penalty that is a percentage of the outstanding amount. If you have extra funds on hand, you can prepay the loan and save on the amount of interest but there will be a prepayment penalty on it. Consider all the charges before you apply for the loan.

  1. Consider your repayment capacity

Whenever you consider applying for a loan, you must ensure that you have the ability to pay it back. In order to find out the amount you will have to pay each month, you can use the EMI calculator. A very useful tool, the calculator only requires you to provide the loan amount and tenure. It will immediately calculate and display the EMI amount. The EMI should be such that you do not face any difficulty in making the payment. It should not strain the finances in any manner. Hence, once you see the EMI, you should analyse the cash flow thoroughly and see whether you have the ability to make the repayment or not. The EMI amount should not be more than 40 percent of the monthly income. Here, the tenure plays a crucial role. If you think that the EMI amount is very high, you need to change the tenure to make it suitable for your repayment capacity. A short tenure means high EMI and a long tenure means lower EMI.

  1. Set the loan amount

You already know the amount of funds you require and where you want to use them. The lender may offer a loan that is higher than what you need but it does not mean you should take the loan. Consider your needs and repayment ability to decide on how much loan you should take. Use the EMI calculator and then set the loan amount. This is a crucial step and should not be rushed.

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  1. Ask for offers and discounts

Do not miss out on special offers or discounts offered by the lender. If you are an existing customer, you can enjoy special rates or a discount on the interest rate. However, read the fine print thoroughly and avoid falling for any gimmicks.

Keep these 5 things in mind when you proceed with personal loan apply online. It will make the loan processing and approval quicker and hassle free.