For many years, people have faced financial constraints without knowing how to address them effectively. Consequently, personal loans emerged as a solution to this problem by providing funds for unforeseen expenses. In fact, with the help of modern technology, applying for personal loans has become more convenient. Once online personal loans are availed, the funds are transferred into the borrower’s bank account almost instantly.
However, this process might seem complicated and confusing for those applying for it for the first time. But don’t worry; we have compiled some essential tips for borrowers to remember while applying for a personal loan. But before we move forward, it is crucial to understand what a personal loan is and its eligibility criteria clearly.
Understanding Personal Loan Eligibility Criteria
A personal loan is an unsecured loan, meaning no valuable collateral is needed to secure it. Borrowers usually utilise it for various purposes, such as medical emergencies, home renovation, debt consolidation, or vacations. To check the borrower’s instant personal loan eligibility, lenders consider several criteria, which often include:
- Credit Score: This three-digit number is the first thing lenders check to determine instant personal loan eligibility. It represents your creditworthiness, i.e., your ability to repay borrowed money. A high credit score can not only increase your chances of quick personal loan approval but also secure a lower interest rate. However, if you are a first-time borrower, you can still apply for a personal loan.
- Income and Employment Status: Steady income and employment are crucial in the online personal loan approval process. Lenders always ensure you have a stable income source to repay the loan.
- Debt-to-income Ratio (DTI): This ratio compares the amount you owe monthly to your earnings. A lower DTI indicates a good balance between debt and income, which is preferable to lenders.
Keep These 5 Factors in Mind While Applying for a Personal Loan
Now that we have learned about online personal loan eligibility criteria. Let us look at the top five key factors you must consider when applying for a quick personal loan:
- Fulfil Personal Loan Eligibility Criteria
Make sure to check your credit score before applying for an instant personal loan. A score above 650 is usually considered good. With a good credit score, the borrower will face no issue in availing a quick personal loan. So, try to maintain a good score because the higher the score, the higher the benefits. In addition to the credit score, the loanee must be between 21 and 50 years of age.
Your income is the other most crucial factor, and typically it should be above ₹ 10,000. Regular income gives the lender a surety that you can pay the monthly instalments (EMIs).
- Consider Additional Costs
Availing an online personal loan comes with additional costs besides the monthly instalments. One additional cost that comes up often is the processing fee. You may also have to pay fees for late payments, part-payment, foreclosure, etc. These charges are mostly levied when you do not maintain a healthy repayment track with your lender. So, you must ensure that you are fully aware of these additional costs and that they do not create any financial stress for you in the future.
- Check the Repayment Plan Carefully
Financial experts always advise creating a proper repayment plan before signing the loan document, no matter how urgent the situation is. This plan ensures that you repay the instant personal loan smoothly without facing any financial burdens. You must know the specific details about the interest rate, EMI, repayment period, and more. This repayment schedule will also help you plan your finances accordingly.
- Apply for the Exact Amount You Need
Lenders typically start presenting attractive offers once you are deemed eligible for the instant personal loan. Moreover, when it comes to personal loans, the process of obtaining one is much easier compared to other types of loans. The simple process may persuade you to borrow a larger sum than you require.
So, you must apply for the exact amount you need in order to avoid unnecessary financial strain. Remember, you can always reapply for another loan whenever the need arises.
- Check the Lender’s Foreclosure Option
Considering the prepayment option before taking out a loan is a wise step. This is in case you happen to get a significant amount of funds unexpectedly and decide to pay off your loan before the due date. So, it is important to first confirm with your lender if they offer a prepayment option.
Conclusion
An online personal loan can serve as a crucial lifeline when faced with sudden financial problems. But don’t dive in headfirst! Take a step back to evaluate the situation at hand. Analyse your requirements carefully and ensure that the loan terms meet your needs. Plan ahead of time for repayment, as completing this obligation is critical to avoid late payment charges. Remember that an online personal loan is not a free pass to spend irresponsibly. Borrow carefully while keeping these elements in mind, and you’ll set yourself up for a smooth personal loan journey that leads to financial security.
