personal loan

What you need to know before taking out a personal loan

Are you looking to apply for a personal loan? There is a lot you need to consider before beginning the process. You might have heard of various loan finance apps in India that give you advice on personal loan applications online, but they seldom have all the necessary information with it.

But, don’t worry! Here, we have curated all the know-how about personal loans and how to apply online. So, without any further ado, let us begin!

Why personal loans?

Due to the pandemic and its economic repercussions, there has been a greater need for borrowing. The number of people taking out personal loan has gone up. Personal loans experienced a sharp increase of 11.9 percent in June 2021.

A personal loan is less expensive than a credit card. Interest rates for personal loans begin at 10.25% (annually). It is lower than all other unsecured loans combined. These loans can be used to meet expenses related to medical emergencies, house repairs, debt repayment, and additional costs. Here is all you need to know about personal loans and their applications.

The process of a personal loan is the same as other loans. After you apply for a loan and submit all required documents, the lender will assess your creditworthiness and make a loan offer. The funds are sent to your bank account and you can use them in any way you wish.

These loans can finance large purchases, debt consolidation, and emergency expenses. These loans can be paid back monthly over months or up to a few years. Depending on your financial situation and how diligently you make payments may take longer.

Do not make a spontaneous decision about your lender

Digitization and fintech are now more widely embraced in the nation due to the lockdown. Customers can access services online. They can directly obtain personal loans from various kinds of lending institutions. The Social Credit Rating System offers loans to those ready to accept one. More options than ever before are available to consumers.

Numerous websites and finance apps are available in India. The critical issue, therefore, is how to pick the best lender. If you need a personal loan, request an offer from the lending institution of your choice, where you can obtain a handy loan with minimal interest.

Interest rates on your loan

Be skeptical of flat interest rates that lenders advertise. Although a flat cost may sound appealing, the payments are greater. It is crucial to pick a loan offer whose EMI interest rate is determined using the lowering balance approach. For instance, the total interest on a personal loan offer of Rs 5 lakh at 10% annually for five years would be Rs 1,44,668. The average annual interest rate will be Rs 28,933. In other words, the annual flat rate will be 5.80. This flat fee deal appears to be quite appealing.

EMI and other charges

Don’t believe what the lender says when it comes to personal finance. Consider your options before approving an EMI plan with 0% interest. Most lending institutions have agreements with FMCG companies for 0% EMI programs on online and offline shopping.

Therefore, before agreeing to such a program, be aware of the processing fee and filing price. Lenders levy a processing fee of 1-2 percent on personal loans. Some demand upfront administrative fees. It is mandatory and is not refundable at the time of the loan application. So give it some thought. In addition, there are several fees, including processing costs, interest rates, foreclosure fees, and panel fees.

Prepayment and foreclosure charges

The RBI does not permit lending institutions to charge foreclosure fees on loans with fluctuating interest rates. The interest rates on personal loans are set. Therefore, prepayment and foreclosure fees may be incurred. The majority of short-term loans waive foreclosure fees. A 4 percent foreclosure fee is applied to the prepaid amount for a regular auto loan or personal loan. Decide on a lender that offers you the most flexibility if you need to repay the loan early.

Credit Score

You may also receive a low-cost personal loan offer based on your payment history and credit score. You are a creditworthy customer if your score is over 750. So it’s essential to keep track of your credit score continuously.

Notably, avoid contacting other lenders to obtain a personal loan. For personal loans, too much research may be detrimental. Therefore, it is essential to leverage the lending market.

If you are still confused about where to get a personal loan at the best possible interest rates, download the Fullerton India InstaLoan app and read through their expert services. To be a beneficiary, schedule a free assistance call and contact them in case of any doubts. Take the first step towards making your loan experience a happy one!

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