Are you in a cash crunch in times of emergencies? Well, a personal loan would be the best choice for you to tide over the financial crisis during the emergency. A personal loan not only shields you during the emergency times but also helps you to cater to your planned needs like wedding arrangements, dream job, higher studies abroad, etc. But before deciding on taking a personal loan, you may get a lot of queries and confusion about it.
You may get a bunch of questions like…
Why a personal loan?
Which one is the best suit for me?
How to get it?
Which is the best loan with a low-interest rate? And a lot more.
It's always best to find the answers or solve your queries first, and then decide on the personal loan. Read on to find the solution to your unanswered questions.
Also Know About this: CIBIL™ Score For Personal Loan
Why Do I Need A Personal Loan Right Now?
Why do I need a personal loan? Ask this question to yourself to know the real purpose of opting for a personal loan. You should ask yourself whether you need a loan to cater to unanticipated emergency needs or a planned need. It is good to be self-aware so that you won't regret the decision in the future. For instance, if you plan to invest a personal loan in the stock market, it would be a bad idea if you lack a stable income source.
If you take a personal loan to realize your dream needs like your child’s education on the board, wedding arrangements needs or a dream home’s down payment would be the right choice. The personal loan will help you to tide over the unanticipated circumstances or a medical emergency. In some cases, the lender may inquire about your need for a personal loan.
How Much Loan Amount Should I Borrow?
The limit of the loan amount is pre-determined by the lender. The loan amount has a minimum & a maximum limit set by every lender. This limit is solely determined based on your creditworthiness. You should decide on how much you need to borrow. For instance, if you borrow money to cater to your planned vacation, you may want to consider building towards that dream by opening a high-interest savings account. In case of debt consolidation or unanticipated expenses, a personal loan would be the right choice for you.
The personal loan amount that you requested should be limited to your actual need. If your borrowing limit exceeds your actual need, it may be costlier for you to repay the loan at the correct time. To compute how much money to borrow, you should add all your debts or expected expenses to know the ideal loan amount.
What Is The Interest Rate & Tenure?
The first question that strikes our minds before opting for a personal loan is, What would be the interest rate of my loan, as the rate may differ from one lender to another. The interest rate of a loan can take a hit due to your credit score, income stability, and other factors. You should consider an interest rate as a cost paid to the lender for borrowing money. Always check how the interest rate impacts the cost of borrowing the personal loan before signing the paperwork.
The loan tenure of a personal loan is 12-60 months. Like an interest rate, the tenure of a personal loan is decided based on the borrower’s credit profile, income, and other measures. Apart from these, the bank or financial institution may also consider your retirement age and employment status while fixing the loan tenure. Also, note that the interest rate & tenure will vary for the loan amount.
Can I Repay The EMIs?
Generally, Personal loans have high-interest rates with short repayment tenures, which eventually increases your monthly EMI. To find your capability of repaying personal loan EMI, do an honest evaluation of whether you can repay or not by considering your income stability. You can calculate your monthly loan EMI using CreditMantri’s Personal loan EMI calculator.
What Are The Charges I Need To Avail Of A Personal Loan?
Generally, a personal loan will arrive with several charges such as processing fees, prepayment, closure charges, and late penalty fees. Let us see what they are:
Usually, lenders will bear some administrative expenses while processing and sanctioning the loan. This administration cost spent by the lender is collected as Processing Fees. Generally, these fees will differ from one lender to another and are imposed between 0.5% to 2.50% on the total loan amount.
Penalty Fee On EMI Defaults
The lender will authorize you to repay the loan in small parts through Equated Monthly Installments or EMIs. Ensure to have adequate money to pay your EMIs in the correct period. If you default EMI, the lender will charge a penalty fee. Always remember to avail of a personal loan at an affordable EMI amount to pay off your loan without hassle and defaults.
This fee is paid to the lender when the borrower wants to pay off the loan before the specified tenure or wants to transfer the balance of the existing personal loan to another different lender offering the loan at a favorable rate.
Generally, the personal loan arrives with an extra charge that is over & above the interest rate. Some lenders can levy the penalty fee for cheque bounce, late payments, etc.
Also Read: Personal Loan Types
What is the documentation of a Personal loan?
Another confusion that arises is, What are documents I need to submit to avail of a personal loan? Well, the documentation will differ from lender to lender. After choosing the lender, you can ask for the entire list of personal loan documents so that there is no time wastage. If you wish to apply for a personal loan online, it is advisable to gather the essential documents and scan them, keeping them ready to upload on the lender’s website.
FAQs of Questions to Ask Before You Take Out a Personal Loan
1:Who is a co-signer?
Some lenders may allow a co-signer to aid you to get quick approval. In case of a low credit score, you can approach a person with a good credit score to act as a co-signer to get a personal loan. If something happens & you default the loan with a co-signer, the lender may make the co-signer responsible for the loan repayment.
2:How long do I wait for the loan amount to be credited?
The lender disburses the loan based on the loan amount and application time frame. Some loans can be credited within 48 hours, but sometimes it may take time. But the instant personal loan has a fast loan disbursement.
3:How to check if the lender is trustworthy?
It is always advisable to check if the lender is registered with RBI bank, with physical existence, and a robust technical system.