For various reasons, people require a personal loan, whether it is a serious illness or personal needs. To obtain funds on loan without any inconvenience, applying for a loan is a normal option that must be freed from the prejudices that it carries with it. A considerable number of people in India are looking for personal loans online to meet their most diverse needs, such as renovating a house or buying a vehicle, higher education of children and so on.
Individuals can take advantage of a so-called “unsecured” personal loan, issued by banks and financial companies in order to meet their specific needs. The standard of income of the borrower, the credit granted, the required documentation and the repayment flexibility are just some of the main factors that lenders evaluate before issuing such loans.
So, if you are planning to take advantage of a personal loan, we will tell you 5 things to consider before taking a personal loan.
- Do the math
Before applying for a personal loan, it is imperative that an individual considers their financial situation honestly, to avoid making choices that could then affect their standard of living. Remember that you do not have to take the longest step of the leg; it is better to choose to opt for a loan amount that is what you really need, because the loans are not money given away but must be repaid up to the last rupee, with interest. Remember that not paying back loans to banks and financial companies may not be a wise choice, as it affects your credit score and raises many concerns for those who evaluate your profile for potential further mortgages and loans.
Those who apply for a loan must calculate the repayment times and the total cost well. Paying quickly, with a higher monthly payment, makes the loan less expensive. Paying less each month makes the loan duration longer. Lower monthly payment results in a higher overall cost due to the interest accrued. In general, it will be better to choose well between those who offer online personal loans and consumer credit, selecting a loan with a duration of 1-5 years (12-60 months). Lenders can provide various formulas and interest rates, but the latter, on an individual basis, typically varies. One of the best portals to apply for loans online is KreditBee. You may also get additional discount and earn bonus via Kreditbee referral code with your friends, just ask them to sign-up Kreditbee with your referral code and you both will get benefits out of it.
- Only if it is really necessary
Not thinking about the actual need for the loan you are about to request is one of the most frequent mistakes that applicants make when they decide to opt for a personal loan.
If the market does not offer advantageous interest rates at that precise moment, or if the applicant’s personal situation does not allow access to credit at advantageous costs, the best thing to do is to wait for better times and give up the operation.
- Not guaranteed
A personal loan is not secured by any asset and therefore for this reason it is defined as an unsecured loan: unlike a home loan, which is guaranteed by the home itself, or certain car loans that have the vehicle itself as collateral. The lender does not request to place particular guarantees, pledges or mortgages. However, this does not mean that anyone can obtain an unsecured loan. Banks and financial institutions in fact x-ray the applicant’s ability to repay, evaluating income documentation such as paychecks or tax returns.
Precisely because it is not guaranteed, when banks or financial companies approve a personal loan, they do so at a greater potential risk and, therefore, the interest rates on personal loans are much higher than home loans, because the lender cannot put hands on any asset in your possession.
- Efficient and fast
The use of personal loans has grown rapidly in recent years thanks to banks and financial institutions, which are now able to provide pre-approved personal loans to their potential customers, sometimes carrying out the entire lending process online.
These pre-approved fast personal loans are provided by both banks and financial companies, or by the new FinTech entities that have recently arrived on the market. However, all of these lenders refer and rely on only one main parameter, the borrower’s income, his credit history and job prospects.
- It is a matter of interest
When applying for a loan, it will be best to evaluate the interest rates offered by different lenders instead of taking the first pre-approved loan that comes along. You also need to keep in mind that the total monthly repayment amount, including interest, should never exceed 30-35% of your net salary.
The rule to avoid making mistakes is to compare the offers on the market, because it is not easy to find the cheapest loan. For this it is worth getting help from a comparator, who in a few minutes is able to provide the best personal loan for each different applicant profile.