Personal Loans are gradually becoming one of the most popular loans in the country, because of the minimal documents requirement and easy repayment options offered in it. Today middle-class families are able to live in their own house or own a car and are able to afford their children’s education because of this easy personal financing method. A personal loan is a perfect solution that can help you in achieving all your dreams. It bridges financial the gap between your bank account and your desires.
However, its popularity is giving rise to frauds. If you check your e-mail you will find it flooding with pre-approved loan solutions etc. Banks are nothing but financing institutes, who like any another business wants to make money. Don’t fall prey to the attractive advertisements of these banks, without a thorough research and study. Here are few factors that we have listed to help you steer clear from any loss while applying for personal loans.
- Difference between direct Interest Rate and Reducing Balance Rate
Don’t just select the lowest interest rate, without reading the conditions. Make sure to check whether the bank offers the loan based on reducing balance basis or have a flat interest rate system. Flat interest rates usually have a lower interest rate value compared to reducing balance rate. But make sure to solve all your queries concerning the subject before signing the loan agreement.
- Borrowing According to needs, not Eligibility
Banks are executives are very popular for convincing loan applicants to borrow amount more than their needs, so enter the door knowing your needs and what amount can fulfill them all. If you require 5 lacs but are eligible for 10 lacs, don’t go ahead and make the mistake of availing a loan worth 10 lacs. Personal Loans are sure an easy way to get money but are also one of the most expensive forms of unsecured debt. Paying interest on the money you don’t want in the first place is just stupid.
- Shop and Research for Better Rates
An ideal buyer always looks for the best purchase before sealing the deal. But don’t go and apply in all banks to check the rate, as it will put a negative impact on your credit score and CIBIL Score. Instead, inquire their prevailing rates by contacting their customer care.
- Select the Right EMI
Be honest with yourself and avoid choosing an EMI rate that will eventually mess with your financial stability. Ensure to do a proper honest assessment and considered any potential expenses that might come up in the near future to calculate your repayment capacity. In case you find that you might be unable to coordinate with these EMI than avoid taking the loan. Failure in paying EMI will add penalties and spoil your credit record. You can EMI potential using a Personal Loan EMI Calculator online.
- Calculate Your CIBIL Score
Most banks in the country are known for sanction the loan based on the CIBIL score. A low credit score can really lower your chances of getting a loan or the bank might put the high-interest rate on your loan. So, you better check your CIBIL score online before submitting your loan application at any banking institute. Usually, users can get a better CIBIL score by paying a small sum of fees instantly.
- Talk to Your Family and Friends
If you don’t require a lump sum amount, then you can seek financial help from your friend and family instead of a bank, and save up all the interest money that you will have to pay to the banks. Don’t straight up go to a bank, especially for small cash crunches.
- Don’t get tempted by the Add-On Offers
Banks today are getting really smart with their marketing strategies, and usually pitch in additional products or features such as insurance policies etc., while selling loans. They might promise you a free deal, but these insurance premiums are added in your EMI and before you know it you are paying extra than what you signed for. In any such interaction with your bank executive, simply state your disinterest without any hesitation. There is no excuse if you fall into their trap now.