A personal loan is one of the best financing options to meet your urgent, short-term or even long-term credit needs. Most borrowers prefer this type of loan because of its quick disbursal, a plethora of benefits and the lack of the need for surrendering collateral. You can use it to pay for your education, wedding expenses, business investment, home renovation or for paying your previous dues.
Furthermore, you don’t need to pledge your property or valuables as collateral for an unsecured loan. Thus, this is the most reliable loan option in case of an urgent need or emergency.
If you are planning on availing a personal loan, apply only after gaining awareness of all the aspects of this type of borrowing. Here are the crucial things to keep in mind before applying for personal finance.
Maintain a good credit score
The credit or CIBIL score is the first thing that lenders check before lending out money. It is representative of your past borrowing history, your diligence for repayment and other factors that increase your trustworthiness. A good CIBIL score is above 750. To maintain a good credit history, make sure you do not over-borrow and make the repayments on time.
Personal loan eligibility criteria
To ensure a hassle-free loan process, you must be aware of personal finance eligibility criteria and make sure that your application is up to the mark on all parameters. Some factors that determine eligibility include age, credit score, monthly income and expenditure, job stability, relationship with the lender and reputation of your employer.
A lender may choose to loan an amount more generous in proportion to your income if you have a perfect credit score. However, make sure that you will be able to repay this amount in the long run, as defaulting on payments can have a tremendous impact and bring down your credit score.
Evaluate your needs
Before submitting a personal finance application, make a list of your needs and requirements. The personal loan interest rate, amount, tenure, and EMI will also depend on your purpose. You can take out a loan for paying for your education, wedding, purchasing a home or vehicle, and many more purposes. Make sure to calculate the total amount you need to prevent over or under-borrowing.
You can also avail of tax exemptions on the interest paid under specific conditions. If you use the funds for home renovation or purchase, or purchasing other assets like gold and silver jewellery, property, etc., the amount paid as interest can be deducted from the total taxable income later.
The right personal finance option can help you tide over tough times with ease. Before applying for personal loan, make sure to have documents like residence proof, identity proof and employment proof in place. You can also check your personal loan EMIs in advance, by using the EMI calculator present at various lenders’ websites.