7 Regulations To Keep In Mind When Taking A Personal Loan

7 Regulations To Keep In Mind When Taking A Personal Loan

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29 August 2022

Personal Loans come to the aid of individuals in a financial emergency. Personal Loans are unsecured loans, which means that it is available without collateral. Also, Personal Loans are easily approved compared to loans that require collateral. 

Personal Loan requirements are simple and are available with banks and NBFCs. Personal Loans have become easily accessible to the public due to the rise of digital lending platforms. However, there are certain things to take care of when availing a Personal Loan.

Read on to know some basic rules to follow when acquiring one.

Determine the Loan Amount

The first step is to determine the Personal Loan amount needed from the lender. Personal Loans should only be used in case of a financial emergency. Don’t apply for a Personal Loan amount that isn’t required at present. Instead, borrowers should break down their financial requirements and pre-decide the loan amount.

People can also choose to check for the pre-approved loan amount. A pre-approved loan amount is an amount that will be offered to a borrower based on the credit score and history with the lender.

With pre-approval, people can apply for what they will be approved. It will decrease the chances of rejection of the Personal Loan application submitted by an individual.

Check your credit score 

Before applying for a Personal Loan, checking the credit score is a must. Lenders determine the trustworthiness of a customer with the help of the credit score. A bad credit score reflects the poor creditworthiness of an individual. In such a case, an individual may fail to fulfil Personal Loan requirements.

CIBIL or credit score of an individual lies between 300 and 900. The minimum CIBIL score for Personal Loans can range from 600 to 700. If someone has paid past bills and EMIs timely, they are bound to have a healthy CIBIL score.

Borrowers with a CIBIL score of 750 or above can get higher Personal Loan amounts than others.

Know the Interest Charges

A Personal Loan is closed by an individual by returning the entire principal amount to the lender. The personal amount is dissolved into EMIs. Every installment consists of part of the principal amount and the interest amount on the remaining principal balance.

For example, if the interest rate is 11%, then an 11% charge will be applied to the available principal balance for each installment.

Borrowers should research the current loan interest rates in the market before applying. A Personal Loan with a lower interest rate will be cheaper for a debtor.

Compare Loan Plans

There is no rule to choosing the first loan provider one stumbles upon. There are several loan providers in the country with different plans and offers. It is better to consider all loan offers and choose the best one. 

Personal Loan requirements can differ from one loan provider to another. Borrowers can look for providers with flexible loan requirements.

Know Your EMI Plan

Loan providers convey the EMI plan to customers before approving a Personal Loan. They usually show a loan amortisation table that includes EMI amounts for each billing cycle. By looking at the EMIs beforehand, an individual can know whether they can afford EMIs or not.

An individual will have financial obligations throughout the loan tenure by taking a Personal Loan. For the same reason, it is better to know about EMIs and financial obligations.

Refer to The Loan Terms/conditions

Every loan provider has some terms and conditions for Personal Loan customers. For example, some lenders do not allow loan foreclosure during the first few years.

Reading the entire T&C document before submitting the loan application is important.

Conclusion

Taking a Personal Loan has never been easier, and the rules mentioned above will help you opt for the best Personal Loan in the market. So, check Personal Loan requirements and submit your application right away! 

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