A personal loan is an unsecured loan that helps to meet an individual’s urgent and unexpected financial needs. While availing such loans, no security is needed to be pledged as collateral for it. Since it comes with a high rate of interest, it is always advisable to keep certain things in mind before availing a personal loan.
So, scroll and read the points below:
Every bank and financial institution has a certain set of eligibility requirements for a personal loan. So, to fit into their criteria, an individual can check their suitability through the Personal Loan Eligibility Calculator provided by these banks. An individual’s income, repaying capacity, credit score etc. are all the important factors that determine their eligibility for availing personal loans. Also, the loan amount and the duration of granting a loan from a financial institution depend on the above factors.
Rate of Interest
On the basis of your credit score, a bank or financial institution decides upon the interest rate in which the personal loan will be offered. These interest rates start from a low of 10% and goes at a higher value of 24%. So, it is advisable to do a proper research on these rates before availing a personal loan, as sometimes you may get the benefit of getting a loan at a cheaper price.
It is well-understood that an EMI or Equated Monthly Income is based completely on the rate of interest and the amount of personal loan. However, sometimes banks or financial institutions also include other charges in accord with their terms and conditions. So always double check these charges and fees so as to save you from paying higher EMIs.
Loan Repayment Capacity
An important factor before availing a personal loan is an individual’s loan repayment capacity. It is advisable to check that whether you will be able to repay the EMI on time because a failure in doing so will land you in financial debt. In order to keep them safe, all the banks conduct a repayment capacity profiling at the time of granting loan thereby ensuring that the borrower has sufficient sources to repay the debt as per the requirement.
Loan pre-payment charges
In case of a personal loan, banks and financial institutions charge a hefty amount on foreclosure of loan as prepayment prevents banks or financial institutions from earning the interest as they had expected to take. So it is always advisable to take a personal loan from such banks which offer a lesser foreclosure charge.