Introduction
During the pandemic, many people have had to take salary cuts, many lost their jobs, & many had to go through a medical emergency. During such challenging times, cash is required instantly. However, due to cash crunch, many people cannot fulfil their financial requirements.
So, the best option to meet your urgent cash needs is a personal loan during these tough times. Whether it is a small amount of Rs. 8000 or you want to fuel big needs with a Rs. 2 lakh loan, all is possible with a personal loan.
Personal loans are unsecured loans taken to fulfil needs such as education, wedding, travel, and medical emergencies.
According to RBI (Reserve Bank of India) data, in September 2021, the total outstanding personal loans were Rs. 29.18 lakh crore, and in September 2020, they were Rs. 26 lakh crore, i.e., in one year, they rose by 12.1%.
Tips to know before taking out a personal loan
When it comes to taking out a personal loan, it’s essential to know what you’re getting into.
It will not only help in improving your chances of getting a personal loan, but you might get a loan at a lower interest rate.
Some of the tips you may consider before taking out a loan are:
1. Evaluate your needs
Personal loans should not be taken lightly, as they involve committing monthly payments (principal and interest) to the lender.
Non-payment of the monthly charges could have severe consequences.
Thus, before availing of an Rs. 2 lakh loan, individuals are advised to assess their needs and evaluate whether they need a loan.
2. Check the credit score
The credit score is one of the vital factors that lenders will assess before approving the loan as personal loans are unsecured.
A credit score shows the creditworthiness of the borrower. Thus, it is essential to know your credit score before applying.
Individuals can maintain a credit score by paying their dues on time.
Usually, it varies between 300 to 900, and between 750-900 is considered to be good.
A low credit score means you may have to consider an Rs. 2 lakh loan with a higher interest rate.
3. Compare interest rates & other fees
There are a variety of personal loans available, so be sure to compare interest rates before you choose one.
Even a slightly higher interest rate can increase your equated monthly instalments (EMIs).
Applicants are advised to consider other charges, such as processing fees, prepayment fees, & penalties charged on default.
Individuals can avail of an Rs. 2 lakh loan with an interest rate of 1.5%-2.5% per month, with no foreclosure/pre-payment charges and minimal processing fees.
4. Choose a reliable lender
Since taking out a personal loan can be a huge financial commitment, it is crucial to choose a reliable lender.
Make sure the lender has a good reputation and is known for providing quality products and services, has excellent customer service and is willing to help you with any questions or problems you may have.
Further, read over the terms and conditions of the loan agreement carefully to make sure you understand what you agree to.
5. Assess the eligibility criteria
Individuals are advised to evaluate the eligibility guidelines of the lender before taking out an Rs. 2 lakh loan. This will increase the chances that your loan might get approval.
All the lenders have different eligibility criteria.
An Indian citizen who is a salaried individual above 21 years and has a minimum salary of Rs. 15,000 to Rs. 18,000 per month can apply.
Conclusion
A personal loan can help fulfil a range of financial needs, such as consolidating debt, funding a home improvement project or covering the cost of a wedding.
When you apply for a personal loan, the lender will assess your creditworthiness to make a decision on whether to approve the loan application or not.
If you have a good credit history, you may be able to get a lower interest rate on your loan.
If you’re thinking about applying for a personal loan, it’s essential to compare the interest rates and terms offered by different lenders, weigh the pros and cons of each option and choose a reliable lender. That way, you can select the loan that’s best for you.
You may learn more about personal loans by visiting the website EarlySalary, one of the emerging platforms for personal loans.
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