If you are in need of funds for an unexpected or large purchase, personal credit loans provide immediate relief. These can help you furnish your house, go for a good vacation, or pursue higher education. Indeed, they would be a better alternative to exhausting the savings.
To ensure that a personal credit loan is a good idea, you should pick the right kind of lender. Let us take a closer look at the factors that you should look at while evaluating lenders.
Comparing the Different Rates of the Loans
Before looking at the process for the application, it is very important for you to find the personal credit loans that are the best fit for you. Some of the key lenders are NBFCs and banks that work in the traditional markets.
You should also know that even an application reduces your credit score, especially if a lender makes a ‘hard inquiry’ into your report. So, the application of the loan should be right at the final legs of the loan procedure.
Initially, it is recommended that you compare the loans, interview the lenders and understand all the required information.
Paying the Right Amount of EMI
Sometimes people go overboard with loans and they end up paying EMIs that put a lot of pressure on the entire finances of the household. Before looking at the evaluation of the lenders, you have to make sure that there are enough savings or monthly income to pay the EMI on a timely basis.
You can look at the eligibility provided by the bank and then at the amount that can be paid without any kind of trouble for your household. One key tip here is to ensure that the EMI for personal credit loans should not be more than 10-15% of the monthly income.
Checking the Credit Score
A good credit score is usually considered to be above 300. If your score is close to 900, then banks tend to be quite open to giving you the personal credit loans you need. While a score lower than 750 usually reduces the likelihood of getting the required loan amount you tend to still be eligible for substantial credit rates.
At the end of the day, the better your credit score, the easier it is to get the loan you need.
Reading the Fine Print
Every loan provider will have a legal document that talks about the terms related to the personal loan. Hence, the seller must ensure that the fine print is read thoroughly and the obligation is clearly understood. Anyone who gets a loan has to ensure that he or she is completely aware of and agrees to all the conditions that are written in the personal loan document.
If there are any kind of doubts, it is better to get it clarified by the lender. Since the contract is binding, one has to ensure that he/she is very comfortable with what is written in the legal document. We would recommend referring an attorney in case you are uncomfortable with or don’t completely understand the legal document.
Look for Prepayment and Penalties
It is very important to use any kind of surplus money to make prepayments towards the loan. This helps in lowering the interest. However, there are certain lenders who have very strict rules when it comes to prepayment with heavy fines. So, it is best to find out what is the minimum prepayment amount that is allowed. This also helps you frame a picture for how your monthly household finances will look like after getting the loan.
All these are good tips to consider before purchasing the loan. You should always exercise care and diligence to ensure that you are not duped into paying off a loan which wasn’t worth it in the first place.
Remember, it’s much easier to get into than get out of debt.