Personal Loans or PLs are one of the most popular types of loan products in India. The loan is unsecured in nature and can be used for a number of reasons. However, there are some important considerations to be reviewed when applying for the loan. We have created a list of five important questions that you should ask yourself before applying.
Be it your child’s education or marriage, or repaying an existing loan, there are a number of ways in which a Personal Loan can be used. This unsecured type of loan is very potent when it comes to rescuing you out of tough financial situations too. With the availability of online loans, even the processing time and documentation requirements have considerably reduced, making it one of the most popular types of loan product in India.
However, with any type of loan, it is very important to be as cautious as possible. We’ve created a list of some important questions that you should surely ask yourself when applying for this type of loan.
- Do I have an alternative funding option?
While a lot of applicants who apply for a PL have a genuine need, many others apply for it even when they do not really need the credit, or have other funding sources which they have not considered. The interest rate on such loans is usually higher than other types of loan. So, it is better to thoroughly understand your requirement and ensure that you are only borrowing an amount that you need.
- Am I eligible for a loan?
Lenders in India have eligibility requirements on the basis of which they approve loan applications. As this is an unsecured type of loan which doesn’t require any collateral against the loan amount, the eligibility criteria for a Personal Loan is more stringent than other loans. Right from your salary, age, existing loans, to your credit score, everything will be taken into consideration by the lender. You can go through the eligibility criteria of your lender before applying to get a better idea.
- Is Personal Loan the right choice for me?
There are now many different types of loan products available in India for a number of requirements. While a PL too can be used for several reasons, it is better to opt for a loan product that better suits your requirement. For instance, if you are looking for a loan to renovate your home or to expand your business, it is better if you apply for a home improvement loan or a business loan.
- Am I getting the best deal?
Even the number of lenders in India has increased considerably in the past few years. With so many lenders, it is often confusing for the borrowers to pick the best. While the interest rate charged on the loan amount is an important consideration, make sure that you also consider other charges like processing fee, late payment fee, pre-payment penalty, and other terms and conditions to choose the best. Shop around for a while, and you’ll surely find a deal that perfectly suits you.
- Will I be able to afford the EMIs?
Lenders are now very flexible when it comes to loan repayments. You can reduce the EMIs and increase the loan tenure to ensure that you can afford regular EMI payments easily. Opting for a higher EMI, which you won’t be able to afford on a monthly basis, would put an unnecessary financial hardship on you and should be avoided.
Remember these questions and make sure that you have clear and correct answers to all of them when applying for a PL as this would make the whole process simpler and convenient.