How to Select the Right Type of Personal Loan for Yourself?
A personal loan is an unsecured loan provided to both salaried and self-employed individuals. It is easier and more convenient to procure because of minimum paperwork and lack of security. The best part is that a personal loan serves multiple purposes, and once the loan amount is approved, there are no restrictions on how you can use the amount.
You can opt for a personal loan apply online and get instant cash for the following reasons:
Social functions like weddings, engagement parties, etc.
- Medical emergency
- Paying off credit card bills
- Funding travel and vacations
- Debt consolidation
- Paying for higher education
There are several perks of getting a personal loan, such as you can opt for a flexible repayment loan tenure. If you have maintained a healthy credit score and repayment history, you can negotiate to get the best interest rate available in the market.
Different Ways to Choose the Right Personal Loan
Getting a personal loan is easy, but the challenge lies in choosing a loan that caters to your needs without adversely impacting your finances. So, here are the tips to find the right type of personal loan for yourself.
Compare Different Personal Loan Rates
The first thing you need to do before applying for a personal loan is to conduct market research. Look for different lenders and their rates offered to individuals. Compare those rates and choose one that best serves your needs.
So, compare personal loan rates, contact those lenders and gather all the necessary information before submitting your application. You must also remember that the rate of interest is dependent on your credit score and monthly income.
Check The Offered Loan Amount
Next, assess your needs and find out how much you need as a loan. Find a lender who can offer a substantial amount that can cover all your expenses. Furthermore, your preferred lender should be able to offer you flexibility in terms of the loan tenure or repayment methods.
Multiple factors impact your loan amount. For instance, a good credit score, a stable income, and a good repayment history indicate that you are a trustworthy borrower. Lenders can sanction a higher loan amount based on your needs.
Look For Flexibility In Loan Repayment
When it comes to prepayment, most lenders offer loans with full and partial repayment charges. For instance, if you want to pay off the outstanding amount of your loan before the end of the loan tenure, you will have to pay a small fee as a prepayment penalty.
However, some lenders do not charge a prepayment penalty. Having a flexible repayment option helps you reduce your overall debt burden due to the reduction of future interest payments. Nonetheless, you will need to pay a small fee, which is generally between 2% to 5%.
Find An Affordable EMI
While choosing a personal loan, assess your needs and make sure that you end up choosing an EMI amount that you can afford to pay every month. You have to be sure that you will be able to make regular payments without any incurring penalties.
Every lender has an online Personal loan EMI calculator that you can use to determine your exact EMI amount. There are three main components of an EMI calculator, the principal loan amount, interest rate, and loan tenure. By adding these values, you can figure out an EMI for yourself based on your needs. The best part is that you can alter the values as many times as you wish until you reach an affordable EMI value.
Just bear in mind that the higher the loan amount, the more your EMI will be. Ensure that your total EMI deductions in a month should not exceed more than 50% of your income.
Take Notice of Processing Charges
Generally, lenders charge a processing fee of 2% to 3% which is deducted from the total amount you are eligible to receive. Prior to applying for a personal loan, take note of the fees that you will be charged to process your loan and then ascertain its affordability.
Carefully Read the Fine Print
Each lender will have you sign a legal document that contains the terms and conditions of a personal loan. Carefully read the fine print to understand your obligation and ensure that you are aware of and agree to all conditions of the loan. As the document is legally binding, make sure you are comfortable with those terms and conditions.
To select the right personal loan for yourself, evaluate your requirements, compare different personal loan rates, and determine an affordable EMI.