A personal loan is an excellent financing tool that can help you in a number of ways. Whether you need to address a cash crunch, or manage your existing debt, work on your credit score or handle an emergency, an instant loan addresses all your needs. Today, you can easily avail a quick cash loan of up to Rs. 1.5 lakh with a loan app.The eligibility criteria is simplified, documentation minimalized, and disbursal is super fact. But before you apply for a quick loan, you must know the tips to get favourable terms on your loan.
In a personal loan, a lenderoffers a loan to cover your short-term cash demand. The lender won’t inquire about the intended use when you ask for a personal loan. You also don’t need to submit any collateral or provide any sort of guarantee against the loan. The lender extends this loan amount based on your eligibility and repayment capability.
Read on to know the tips to get the best deal on your personal loan.
How to Get the Best Deal for Personal Loans?
There was a time when lenders were scarce and borrowers many. So, the lenders used to exert high interest rates and unfavourable terms on the instant loans. But today, the market is inundated with lenders. Banks, NBFCs, fintech companies, loan apps and other individual lenders offer short term loans with attractive features. This increased competition has not only brought down the interest rates, but have also made this financial tool customer-centric rather than profit-centric.
Today, borrowers can enjoy many favourable terms on their loans. Like many lenders waive off the processing fee and offer discounts on other fees if you are an eligible applicant. In addition to this, they may also offer lower interest rates and other features on the loan. You must visit the lender’s websites or download the app to check the interest rates and other terms and conditions on the loan.
Here are the factors that you must consider before applying for the loan –
1. Determine the rate of interest
This is one of the most important factors that you must check while applying for an instant loan. Your interest rate affectsyour EMIs (equivalent monthly instalments) and the loan term. Calculate your personal loan’s EMI using an EMI calculator to determine which options are best for you.
You must check the interest rates offered by different lenders, compare them and sort out the ones offering the lowest interest rates. Even a slight change in the number can have a big effect on your total interest payout on the loan.
2. Select the lender carefully
Personal loans are offered by banks, NBFCs (non-banking financing companies), and fintech entities.However, the terms and conditions vary between traditional lenders and new lenders. Banks and NBFCs may offer lower interest rates, but their terms may not be suitable for you.
Check each of these components thoroughly. Check out loan aggregator websites to find the lowest interest rates, fees, and terms.A loan app offers a convenient way to apply for loans anytime and from any location. You can quickly apply for an instant loan from anywhere and get the cash processed within hours.
3. Maintain a high credit score
A personal loan is an unsecured kind of credit. As a result, lenders will look at a borrower’s credit score before accepting a loan, which shows the creditworthy of the borrower.A low credit score can result in loan rejection or a higher interest rate. That’s why you must check your credit score before applying for the loan.
In case, your credit score has suffered in the past due to a negligence or issue, you must work towards improving it. Some of the sure shot ways to improve your credit score is by closing your current debts, consolidating your debts and maintaining your credit card usage below 30 %.
4. Opt for a short tenure
A long tenure offers the convenience of lower EMIs. This maymislead you to choose a longer term. However, because interest is charged on the balance each month, the total payback will be larger throughout the loan if you opt for a longer tenure.
Short tenures can help you save on your total interest payouts. It further clears your debt quickly making you eligible for a new loan. You must balance your EMI affordability, loan amount and loan tenure very smartly. It must fulfil your needs, not strain your monthly budget and yet be over in the shortest possible time. Using a personal loan calculator can help you find the right balance of these factors.
5. Ensure prompt payment
You must make your EMI payments on time to prevent a negative impact on the credit score. Being late on your EMI even by one day can also lead to late payment penalties. That’s why, it is important for you to never miss an EMI and always pay it on time.
You can opt for auto-debit facility for your loan EMI. You just have to maintain sufficient balance in the account and the EMI amount would be auto-debited. If you have opted for a cash loan through a loan app, then you receive multiple notifications and reminders. This will prevent you from missing an EMI payment.
6. Check for hidden charges
When applying for a personal loan it is very important to research your lender well. You must read through the terms and conditions and all the other details mentioned by the lender on their website regarding the loan. Check for hidden charges along with the interest rates.
Many lenders charge a loan application fee, processing fee, penalty fee, loan transfer fee, prepayment fee etc. You must check these charges and go for a lender that charges minimal fees. Many may even waive off these fees or offer discounts on these if you fit into their eligibility criteria perfectly.
7. Inquire about the costs associated with foreclosure
Whenever you boorow a loan, the first and foremost goal is to pay back the loan and close it at the earliest. That’s why lending institutes offer foreclosure option on your loan. This means you can close your loan account by paying the loan amount and interest in full before the end date of the loan.
Lenders may charge a foreclosure fees to cover up the processing costs and the loss they endured because of foreclosure. You must check this fees before choosing your lender. You must also check for ways to avoid this foreclosure fees. One such way is to opt for a floating interest rate.
Conclusion
Applying for a personal loan has become a lot simpler, needs less documentation, and takes less time to process.Now, that there are so many financial institutions offering loans at competitive interest rates. But you must be very cautious while applying for an instant loan. Maintaining a solid financial health can help you avail a loan at favourable terms.
Working in a stable job, either in a government job or a multinational company, will help you get favourable terms on your loan. In addition to that, having a good salary, maintaining a good credit score and having a low income to debt ratio can help. You can downloan a loan app, to check your eligibility and find the favourable terms on the loan.