What is a personal loan?
A personal loan is an unsecured loan that can be used for short or medium-term fund requirements. You can use the amount you get from a personal loan for various purposes like wedding, medical expenses, child's tuition fee, plan a vacation, debt consolidation or miscellaneous expenses.
You can easily apply for a personal loan at a bank or NBFC (Non-Banking Financial Companies) in India. This increases the risk chance that you will face in the near future. So it's advisable to consider all the factors that affect the personal loan first and then make any decision regarding it.
Factors to consider while applying for a ideal personal loan:
Credit Score:-
It is a number between 300-900 that determines your creditworthiness. The higher the number is, the more creditworthy you are. The most accepted credit score is 750 or above. So it's essential to maintain your credit score. If your credit score is high, then your personal loan application will be quickly approved. But if your credit score is low, then a lot of banks will reject your application. However, some banks allow an individual with a low credit score to apply for a personal loan, but you'll have to pay a high interest rate on monthly EMIs.
Loan Amount:-
Deciding a loan amount is the most basic requirement for a personal loan. You'll have to decide the loan amount that you need. A lot of banks (like Dena bank personal loan and Canara Bank) do offer more money than required. So don't fall into that trap and only borrow the money that is needed by you. Because you'll have to repay that amount along with the personal loan interest rate, so it's easier to choose a loan amount that will be repaid in no time. However, banks allow you to take loan amounts according to your income. So if your income is low, you won't be able to apply for a high loan amount.
Repayment:-
Customers have the flexibility to choose the repayment tenure and structure according to their income. Banks offer a lot of repayment structures so that you can pay your loan amount along with the interest rate within the loan tenure. However, it is advisable first to calculate all the expenses and then deduct them with your income to choose your EMI amount. With the help of the EMI amount, you can select a repayment structure that is best for you. It is ideal for keeping your loan tenure as short as possible because you might end up paying more money as interest.
Personal loan interest rate:-
The interest rate usually differs from one bank to another. So different banks have different interest rates for various loans. Interest rate is the primary source of profit for banks. It's the extra amount they take to give you money for the loan. So it's essential to choose a credible bank that provides a low-interest rate. The Personal Loan Interest Rate usually varies between 8%-18% per annum. So it's better to compare all the choices and then choose the one that provides the lowest interest rate.
Eligibility Criteria:-
The eligibility criteria also differ from one bank to another. So it's essential to check whether or not you fit into the bank's eligibility criteria perfectly. There are online tools like 'eligibility criteria calculator' that are provided on each bank's website. You can use that tool to check whether or not you're eligible to apply for a personal loan at your bank.
Conclusion:-
It is crucial to choose all the options available and then choose the best one for you. So it would be best if you chose all the banks and then select the one that has more credibility and provides a low interest rate. Many banks offer various unique facilities, so do some research and then choose the right lender for you.