Getting an instant loan online has become an easy task, thanks to the digitization of banks and other financial institutions. You can make a personal loan application, submit the documents, and get approval within a few days from the comfort of your home. However, not every loan offer is the same. The interest rate, EMI, processing fee, and even the repayment period can differ depending on the lender and loan offer. That’s why you need to consider the aspects and the things related to the loan carefully before you even apply for it. Not sure where to start? No worries. Here is a list of things you must consider before taking a personal loan.
1) The Loan Amount:
Before you take a personal loan, you need to ask yourself a question. How much money do you need to borrow to deal with your financial bottleneck? And can you repay the loan on time without wrecking your finances in the future? Evaluate the reason why you are borrowing the money to ensure the loan amount is just enough to bring you out of your current financial crisis. Never borrow more money than you actually need or are capable of repaying over time. Once you figure this out, you can apply for personal loans online.
2) Repayment Period:
Always check the repayment terms of different personal loan offers before you apply for them. The repayment period or the loan tenure is the number of months you need to make EMI payments until you fully repay the loan.
Please understand that the longer the repayment period is, the lower the EMI will be. But it also means that you have to pay more money in interest at the end of the loan tenure. Make sure you get an instant personal loan with a proper repayment period. This way, monthly installments shouldn’t be too much of a burden to you.
3) Interest Rate of the Personal Loan:
The interest rate of the personal loan varies greatly, depending on the lender and your credit score. Most private banks offer a personal loan with an interest rate of at least 10.25 percent per year. And it can be higher depending on your credit score, job profile, the company you work for, your age, etc. Some banks even offer different instant cash loans with a wide variety of interest rates.
Keep in mind that the higher the interest rate your bank charges, the higher the EMI you would need to pay every month. Compare the interest rates offered by different lenders to get a personal loan with a low-interest rate.
4) EMI:
Equated Monthly Installments, or in short, EMI, is a crucial factor that you must consider carefully before getting a personal loan. This is the money that you will have to repay to your lender every month after you take a loan. It’s made up of a portion of the loan amount and the interest.
When you get a personal loan, you must pay the EMI every month until the loan is settled. Failing to repay even a single month’s EMI will negatively affect your credit history and credit score, which will make it difficult to take loans in the future.
5) The Lenders’ Credibility:
Nowadays, many individuals apply for a personal loan online without even checking the credibility of the lenders. All they check are the loan details and terms and conditions for borrowing the money. But this is not a healthy habit. Whether your lender is a bank or a private finance company, you should always check their credibility before you even apply for a loan. Read online reviews, research the track record of your lenders, and focus on the testimonials to see if it’s safe to borrow money from them.
6) Prepayment Options:
If you suddenly get a large sum of money (It can be because of a salary hike, a bonus, or a large amount of profit in business), you should use it to prepay the whole personal loan or a portion of it. After all, why would anyone want to drag the loan to the end of its tenure and pay more in interest?
However, some lenders don’t give you the option to make prepayments on a loan or close it early. Even if they do, they will charge a certain percentage of the principal as the prepayment penalty.
Therefore, you should always ask if your lender offers the option to make prepayments on your loan or close it as soon as you have enough money. We recommend you get an instant personal loan from a lender that offers a prepayment option without any sort of penalty.
7) Documents:
Every lender would require you to submit a few important documents when you apply for a personal loan. The lender needs these documents to have a good understanding of your monthly cash flow and to verify your identity.
Here’s a list of documents banks and other lenders usually ask for:
- Income Proof: Salary slips, Form 16, Income Tax Returns, and Bank Account Statement.
- Identity Proof: Passport, Voter ID Card, Aadhaar Card, or Driving License.
- Proof of Address: Aadhaar Card, Utility Bills, Passport, or Ration Card.
8) Processing Fee of the Loan:
Banks and other financial institutions always charge a processing fee whether people apply for personal loans online or offline. The only thing that varies is the amount they charge as the processing fee. Some lenders charge a processing fee ranging from 0.25 to 4 percent of the principal amount. Others charge a flat fee in cash upfront. Compare the fees charged by different lenders to get a personal loan at a low cost.
Conclusion:
As you can see, there are a whole lot of things that you need to consider before you even think of getting a personal loan. You need to have a clear idea of the loan amount, EMI, loan tenure, required documents, and many other things to evaluate before you can take an instant loan online or offline. Understand why you need the loan and create a solid repayment plan. This is one of the best ways to get the loan, solve the immediate problem, and repay the loan quickly to have one less burden on your shoulder.
