The market for personal loans in India grew by 20.4% between 2017 and 2018. The main reason behind the popularity of such credits is that they come with no end usage restrictions. It offers a high amount and can be used to fund a plethora of sudden but substantial expenses, including medical emergencies, vacations, higher education, marriage, and more.
Also, the introduction of multiple personal loan apps has made it easier for borrowers to avail such advances. Furthermore, such credits come with a wide range of benefits and serve as an ideal tool to fund the necessary expenses during a financial crisis. Borrowers should be aware of the following rules before taking a personal loan-
- Compare The Interest Rates
The interest rates on personal loans offered by various lenders can differ based on a lot of factors, especially their required eligibility criteria. Borrowers should shop around for better interest rates to ensure that they avail the lowest rate on their loan.
- Maintain A Good Cibil Score To Avail An Instant Loan
CIBIL score of an applicant is one of the most crucial factors that affect the terms associated with a loan. A CIBIL score is a number ranging between 300 and 900 based on the repayment history of an individual. A credit score of 750 or above is considered ideal.
Financial institutes determine the creditworthiness of a borrower via their respective credit score. A high credit score reflects that the borrower has a higher financial credibility and is more likely to repay the debt within time. Lenders are expected to offer better interest rates and other beneficial terms to such individuals.
Borrowers who have a credit score of less than 750 should take the required steps to improve it. Financial institutions can even reject a loan application if a borrower has a low credit score.
- Do Not Borrow More Than You Can Pay
Borrowers must select the credit amount wisely according to their repayment capability before they avail a personal loan. Defaulting an EMI can massively impact the credit report of an individual and lenders can charge a significant amount of penalty charges for that.
They should consider their current debt obligations and determine the monthly instalment amount they are comfortable in repaying. They can use an EMI calculator offered by several lenders on their instant loans app to decide the amount.
- Choose The Loan Tenor Wisely
Loan tenor can significantly affect the total cost associated with a loan. A higher loan tenor can reduce the EMI amount, but it substantially increases the total cost of a loan. On the other hand, a shorter tenor comes with a high monthly instalment amount, which can create a massive financial burden on a borrower. Borrowers can determine the ideal tenor for them and avail a loan from lenders that offer an extensive range of tenor options.
Bajaj Finserv is one such NBFC that offers flexible loan tenors ranging from 1 year to 5 years on personal loans. Borrowers can log on to the Bajaj Finserv Experia App and easily apply for such credits.
They also provide pre-approved offers to make the process of availing finances simple and less time-consuming. Pre-approved offers are valid on a wide range of financial products and services, including personal loans, home loans and business loans.
- Avoid Multiple Loan Applications
Every time a borrower applies for a personal loan, lenders conduct an enquiry on the credit history of the individual. They can consider applicants credit-hungry if they make multiple applications across numerous loan apps to avail such credits. Borrowers should wisely choose the financial institutions they want to avail an advance from. Also, numerous applications can negatively affect their credit score.
Borrowers should keep the rules mentioned above in mind to make the most of their personal loans. Also, they should avoid making mistakes on the applications they submit on the personal loan apps to ensure that it does not get rejected.