A personal loan is one of the most popular financing tools that offers you instant financial aid. With instant loan apps you can now get your loan processed within minutes. This is particularly very helpful in case of financing medical emergencies or urgent purchases. However, availing a personal loan is a big commitment. You must consider all the aspects of this loan before applying for one.
Here are eight crucial questions that you must ask yourself before applying for a personal loan –
- Have you checked your credit report? This is perhaps the most basic but also the most ignored step. . How much money you can borrow and what will the interest rate depends on your credit score. Unfortunately, in India there are many cases of credit denial because people never bother to check their credit report. This prevents them from correcting mistaken entries. There are multiple credit reporting agencies active in India and you must check your report from at least two of these before you apply for a personal loan.
- Where are you taking the loan from? There are many lenders that offers a personal loan. Many people continue to borrow from traditional financial service providers which are very slow, expensive and have complicated procedures. Today, the personal loan market has become a very competitive arena. Lenders offers several benefits to their borrowers. You can download the best loan app in India and get the best deal on your loan. Make sure you consider things like speed of processing, company background, interest rate and other fees.
- How much are you borrowing? This is also an important thing that you need to consider before applying for a personal loan. Many times, people borrow much more than they can actually afford to repay. This is particularly true, when you are considering a personal loan for big-ticket expenses like wedding or travel. Before applying for a personal loan, you must plan your repayment. Make sure to consider all the aspects like interest rates, job security and alternative options to a loan.
- Have you saved an emergency fund? Not many people realise this but if you are about to avail a personal loan, you must ensure that you have an adequate emergency fund. Most personal financial experts say that you should carry money equal to two months of your salary in a bank account that you should only touch in an emergency. The emergency could be job loss, unpaid medical leaves, recession or a pandemic. So, even if you are not working for a few months, the emergency fund shall be able to take care of your EMIs.
- What will be the loan EMI? When a lender gives you a loan, they check both your income as well as your expenses and obligations. However, you must be the first judge of how much money can you afford as an EMI. Draw up a monthly budget in which you should list all your monthly expenses and savings. Then you can consider the amount that you can spare per month to pay off the monthly loan installment. Again, it is very important to keep in mind that just because you can pay a certain amount of money as EMI, does not mean you should take as much loan. Remember, the less you borrow, the less interest you pay to the lender.
- What will be the interest rate? Interest rate is the most important factor that you should consider. It is how the lenders earn money from you. With conventional lenders, you will always end up paying high-interest rates because of their high overhead costs. On the other hand, if you look for best loan app in India, you will always find their interest rate to be very competitive. See the fact that the business has a lean operation and can pass on cost benefits to customers is a very important factor that makes any app the best instant loan app.
- What are the modes of payment available to you? Different borrowers may offer different modes of loan EMI repayment. Some may require you to deposit cash in an office monthly, some may ask you to mail or courier in a cheque or demand draft. The best instant loan app will allow you to set up an auto debit on your account where all you have to do is maintain enough balance in your account. The EMI amount will get auto-deducted every month.
- Are there any prepayment charges? Finally, you must also check with the lender about their policy related to early payment of your loan. Make sure to ask your lender what the policies are related to prepayment of loan and foreclosure charges.
It is only if you are satisfied with your replies to all these queries that you should actually proceed with the loan application process!