With an increased number of consumers applying for personal loans, specifically for big-ticket purchases, the Marginal Cost of Funds based Lending Rate (MCLR) rate was 8.65% as of March 2019. Personal loans come to one’s aid in case of financial shortfalls for needs such as higher education, medical contingencies, or even buying a new house.
Put simply, a personal loan is a loan borrowed by individuals, either from a bank or any financial institution to meet their personal requirements. A personal loan is usually provided on the basis of criteria like credit history, employment level, and creditworthiness, among others.
However, with increased ease of availing funds, it is possible that you may overlook the crucial aspects of borrowing a loan. Here is a low-down about things you must not ignore while availing of personal loans.
1. Your credit score
While evaluating your personal loan application, your credit score is one of the most vital parameters that will be evaluated by the lender. Your credit score depicts your creditworthiness. The lender will give considerable weightage to your credit score when deciding whether to sanction the loan to you. The chances of your loan approval can be boosted if you have a good credit score. Adopt habits like paying your EMIs on time, monitoring your joint loan accounts, and maintaining the credit utilization ratio between 20-30% of your income to have a good credit score.
2. The interest rates
With numerous banks and financial institutions providing personal loans between the range of 10.99- 26% interest rates, it is important that you choose the right lender for your loan. Choosing the first loan that you come across is not favorable. Rather than opting for an online personal loan, visit the lender or the official financial marketplace to apply for a personal loan. It is also highly essential that you understand the type of interest rate you would be paying – a flat rate or a reducing balance rate. A reducing balance rate is generally considered preferable to a flat rate.
At times, you may come across tempting loan offers but it is recommended that you compare the interest rates before choosing to borrow a personal loan from a specific lender.
3. Loan tenures
While applying for a personal loan, your loan application is assessed by your lender based on your DTI (Debt To Income) ratio, that is, the ratio of your income being used up in paying your existing debt including loan EMIs and credit card bills. It is recommended that while opting for a personal loan online, you keep the loan repayment tenure as short as possible, as long tenure may result in a comparatively higher outgo of interest.
4. Refrain from applying to multiple lenders
When you apply for a loan from any lender, the lender fetches your credit report from CIBIL to evaluate your creditworthiness and your ability to repay the loan. This lender-initiated request for your credit report is considered as a ‘hard inquiry’ by the credit bureau, and during each inquiry, your credit score is pulled down by a few points. Thus, when you apply to multiple lenders, thereby generating multiple credit-report requests, you may come across as credit-hungry, leading to lenders rejecting your loan application.
5. Do not refrain from paying the processing fees
GST, service charges, and processing charges are a part of your personal loan application procedure and one is liable to pay for these charges at the time of processing your personal loan. It is therefore significant that you compare the rates of such fees and charges among the lenders and opt for a loan from the one who charges the least.
In addition to such factors, you should also keep in mind a couple more pointers.
- You can apply for a personal loan online or offline. Applying online will let you compare the rates of different lenders and in many cases, help you avail of cheaper deals as well.
- Avoid the practice of job-hopping frequently, as it comes across as a sign of an unstable career and may make the lenders question your credibility.
- Check the eligibility requirements thoroughly before applying for a loan. Applying without doing so would be futile and would likely contribute negatively to your credit score.
Keeping these factors in mind, you can apply for the Bajaj Finserv Personal Loans on Finserv MARKETS. If you meet the eligibility, your loan application will be processed within 3 minutes and your loan amount will be disbursed to you within 24 hours! With interest rates starting from 12.99% p.a., you get customized loans as per your personal requirements. You can calculate your loan eligibility online by using Personal Loan Eligibility Calculator on Finserv MARKETS. Check your loan eligibility and loan EMIs online just in a few clicks! Whether it’s your marriage, education, or any urgent medical needs, avail your Personal Loan on Finserv MARKETS now!