5 Things You Must Not Overlook While Applying for Personal Loan

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Personal Loan

Life is amazing if you look at happiness and joy. It is too short to delay and cancel any sort of happiness. There is no harm in celebrating your special days with friends and family. It is absolutely fine if you are borrowing to buy a few memorable moments of happiness. Yes, an instant loan is a bliss to help you meet all your happiness.

It is an unsecured loan and comes with flexibility in usage. So, if you don’t have any property to keep as security, you can easily get a personal loan. Assuming that you are looking for a personal loan, this guide will help you understand the amazing way your loan will work. There are a few things that you cannot overlook while applying for a personal loan. If you do, you end up being in a debt trap.

  1. Maintain your credit health: If you are planning to take up a personal loan, you need to consider your credit health. Your creditworthiness will depend on whether you will get a loan, and if you get one then at what interest rate. Your credit health will be marked based on your credit score and credit report. There will be a 3 digit number that speaks about your financial condition. If that is positive, you can get an easy loan with a low rate of interest because the loan provider does not find any kind of risk associated with you. Now, to maintain a good score you need to stop taking multiple loans, use credit cards, and pay bills on time. Stick on to your old credit card and make the necessary expenses only.
  2. Compare loan provider: If you find yourself eligible for a loan, after checking your credit score, you need to compare the loan provider. The market is filled with various sorts of financial institutions and loan providers offering you attractive deals. You cannot settle for one without comparing and checking enough good options. Some will give you a high rate of interest, some low principal amount, while some will take a long approval time, it highly depends. Shop around well till you have compared a good number of loan providers. If you compare among clothes, then how can you settle for one in such an important aspect. Look for the costs incurred by every loan provider, and only then fix a deal.
  3. Fixed obligations to income ratio: This ratio is important to keep up with healthy financial planning. You will have to consider that your fixed obligations to income ratio do not exceed 50%. What does this mean? This ratio means, what percentage of your fixed obligations take up your source of income. The fixed obligations are your fixed monthly expenses like house rent, food, and electricity that cannot be ignored. Banks will find it safe to offer only if your fixed obligations are taking a maximum of 50% of your income. If that happens, you can go for a loan and have a disposable income to pay off your loan EMI amount. However, if you have more than 50% of income invested in fixed obligations, it becomes difficult for you to pay debt EMI monthly.
  4. Don’t go for multiple applications: Don’t think that sending multiple loan applications, will give you one approved loan. It will do you damage. Every time you send an application, the loan provider runs through a check with the credit bureau. Multiple enquiries and takes down your credit score points. Stop sending multiple loan applications and hurting your credit score.
  5. Bring job stability: Personal loans will not need collateral, but they will check your income. Before you apply for a loan, make sure you have a fixed source of income. If you are employed and earning well, your chances of loan approval increase. Make sure you are working with some organization stably. If you are switching companies often, it shows your instability. If you don’t look stable, the loan provider may think before offering you a personal loan. Work on your employment before you go ahead with any kind of loan. A stable job will create a positive impression, and you can get your loan approved easily. 

Wrapping up

Apart from all the above-mentioned considerations, the most important one is to assess your ability to pay. You must consider your capabilities to pay back before you borrow. It is easy to borrow, but you need to be responsible while in terms of paying the EMIs on time. Use a personal loan calculator and keep up with your calculations. A fixed EMI amount will help you plan your finances well and manage your other expenses without hurting your credit score and other wishes.

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