Things to Consider Before Considering Personal Loan Financing – Explanation!
The increasing penetration of the Indian financial market into the remotest regions of the country has made financing widely accessible. Today, you can avail an instant money loan with a few taps on your smart phone. The eligibility criteria are simpler and so is the documentation process. The documents are approved instantly and the loan amount is processed within hours. With such ease of availing finance, you must practice necessary caution before applying for an instant cash loan.
Personal loans are a huge financial liability. The loan EMI is going to affect your budget for months. Thus, it is best to consider all aspects of committing to this liability and planning well in advance.
Here are some of the essential things that you must consider before choosing personal loan to meet your financing needs.
6 Important Things to Consider Before Going for Personal Loan Financing
A personal loan is a very helpful financial tool that can save you from a financial crunch. But you must use this tool very carefully, as misuse could lead to debt trap, poor credit score, high EMI burden and poor financial management. So, to make a sound financial decision, check out these 6 important things in your loan offer.
Interest rates and charges applicable
One of the first things to consider when availing a personal loan is the overall interest rates and charges on the instant money loans. Because these loans are unsecured in nature, lenders often levy high interest rates to balance their risks. You must compare different lenders to find the lowest interest rates in the market.
Today with the availability of lending platforms like online loan apps, you can easily compare and find the lender with lowest interest rate. You can also negotiate the interest rate with your lender if you have a good credit score, stable employment and existing relationship with the lender.
Type of interest rate you should opt for
Your overall affordability for the advance depends on the interest rate system that you choose. When availing the finance, you get the option between fixed interest rate and floating interest rate. You must know about these interest rates to make the right choice.
Fixed rate remains constant throughout the loan tenure and remains unaffected by market fluctuations. But it is set a notch higher than floating rates. Floating rates are subject to market rate fluctuations. But it also brings the opportunity for the lowest rate levy. There are many benefits of choosing floating interest rate like they have no foreclosure fees. But you must have the financial appetite to handle fluctuating EMI every month.
Choice of tenure
You must also think twice before choosing the repayment tenure. Your repayment tenure will affect your interest rate and the total interest pay out. Most lenders have a fixed interest rate for a particular slab. With increasing loan amount and loan tenure, your interest rate will also increase.
While applying for an instant cash loan, use a loan EMI calculator to make the right choice of loan amount and loan tenure. Keep your loan tenure as short as possible and as feasible as possible. This will help you save big on your interest. In addition to that, it will also help you get debt free quickly.
Analyse your total financing requirement
When proceeding with the loan, you must make sure to consider your total loan amount requirement. You should only avail as much amount as necessary even though you might be eligible for more.
Make an estimate of your budget and your loan requirement. Check if there is room for adjustment so that you can bring down the borrowing amount further. The loan amount should suffice your urgent needs and cut down any unnecessary costs. Keeping the loan amount as low as possible will help you repay the loan more conveniently.
Personal Loan Financing Eligibility criteria and document requirement
Another aspect that you cannot ignore is the eligibility criteria and document requirements. Meeting the minimum criteria and paperwork requirement is essential for the loan. You must also keep all the documents handy for hassle-free paperwork when availing the financing.
Most lenders have a set of eligibility criteria. The primary factors that influence your loan eligibility are your age, salary, employment, credit score and nationality. The eligibility criteria is quite simple but you must go through all the rules before applying for the loan.
Choice of lender
Your choice of lender shall critically determine how favourable the loan will turn out to be. You can compare different lenders in the market based on the features and facilities offered for this loan.
Check out the total loan amount, tenure flexibility, EMI affordability offered, interest rate levy, and other crucial parameters. Make sure to read the reviews online and check their customer service ratings. You must do proper research before choosing the lender. It is a long financial commitment that you are entering into, and having the right partner is very crucial
Once you have made these crucial considerations, you can proceed to apply for the instant money loan with your selected lender. Enquire about all essential aspects related to the advance like the applicable terms on the loan and the interest calculation method.
Keeping all boxes checked for this unsecured financing is a great way to go make the right borrowing decision. This not only keeps the loan affordable for you but also brings the best terms on the advance. Being a little cautious will help you in managing your finances well.