Personal loan lets you meet your immediate financial shortage easily and quickly since you do not need to collateralise your properties. However, before engaging in debt obligations, you need to check how attractive the terms of your personal loan are. It will help you repay your debt easily without losing financial stability. Let’s discover how you can secure the best personal loan deal.
9 Strategies to Get the Best Personal Loan
Here are some of the basic rules you need to follow to secure a personal loan at favourable terms:
- Compare Interest Rates: Personal loan interest rates may differ from one financial institution to another. This is why if you take this financial assistance without checking the interest rate of different lenders, you may end up borrowing at a higher charge. A higher interest rate can significantly increase your borrowing cost and EMI amount. By comparing the interest rates of different credit offers, you can get an affordable loan and keep your total borrowing cost at a minimum.
- Read the Eligibility Parameters: Every lender sets eligibility standards for their loans to ensure that applicants can repay their debts easily. Since such borrowers are less risky for a lending institution, it can offer them credit at attractive terms. Hence, you need to check and ensure that the lender you chose has eligibility requirements fit for you.
- Maintain a Healthy Credit Score: A good credit score reflects your credibility as a borrower. This is why lenders set ‘credit score’ as one of their eligibility parameters and prefer extending the personal loan only to borrowers who meet it. Conversely, if your credit score is lower, the lender can reject your loan application or extend the credit only at a higher interest rate.
- Abstain from Multiple Loan Applications: When applying for a personal loan, financial institutions make hard enquiries about your repayment history from credit bureaus. After that, these bureaus register all these hard enquiries into your credit report. They also reduce your credit score if they find multiple enquiries in your name within a short period, thereby decreasing your credibility as a borrower. As a result, it can become difficult for you to get the required personal loan. You should ideally choose a lender with the chance of getting approval on your loan request is higher. It may help you avoid applying for the credit twice.
- Know Associated Charges of Personal Loan: Besides the interest rate, a personal loan comes with several associated charges, such as processing fees, verification charges, late repayment fees, etc. These charges can significantly increase the total cost of your borrowing. So, while choosing a lender, you should check these charges to ensure that the deal is favourable.
- Avoid Advanced EMIs: In an advanced EMI facility, you need to pay the first EMI before the loan amount gets credited into your account. Borrowers deduct the first instalment and processing fees from the principal amount while disbursing it. As a result, you will get a lower credit amount than what you applied for.
- Know Foreclosure Norms: Foreclosure of a loan lets you end your obligations at one go. It helps you reduce outgoing interest since the loan and its rate do not remain active till the last date of the tenure. However, lending institutions charge an amount to facilitate this financial service. There may also be other adverse terms and conditions of foreclosure. This is why, while choosing a personal loan offer, you should carefully read the terms and conditions of foreclosure properly.
- Negotiate with Lenders to Reduce Interest Rate: The processing fees and other associated charges are non-negotiable, but you can request your lending institution to reduce the applicable interest rate. However, they can fix this rate in your favour only if they are assured that you are a reliable borrower with good creditworthiness and strong financial position. Therefore, before you negotiate the interest rate, you should ensure that you have a stable source of income and meet the eligibility criteria properly.
- Choose a Tenure with Affordable EMIs: You also need to select a lender that offers a longer repayment period. It will help you choose your personal loan tenure in which the instalment is within your budget. With such a repayment period, you can meet your loan obligations without facing any financial challenges. While applying for credit, you can use the personal loan EMI calculator to understand what tenure will be appropriate for you. It is an online tool available on the websites of most lending institutions.
How to Use a Personal Loan EMI Calculator
You need to follow the steps mentioned below to apply for a personal loan:
Step 1: Visit the official website of your lending institution and find the calculator.
Step 2: Enter all the required inputs, including principal amount, interest rate and a convenient tenure.
After this, the calculator will display your monthly EMI amount and total interest outgo on its result page.
If you see that the EMI amount is high and may put you into financial distress, you will have to adjust your preferred tenure to understand which repayment period will be suitable.
Nevertheless, as mentioned earlier, you must meet the eligibility standards to get the best deals on the personal loan. So, you must have an idea about these basic requirements.
Eligibility Parameters for a Personal Loan
Following are the basic eligibility standards that individuals need to meet to qualify for a personal loan:
- Applicants must be Indian
- Their age must be over or equal to 21 years
- They need to have an income of at least Rs. 15,000
- Having a CIBIL score of at least 600 is necessary
- Their minimum working experience should be 2-3 years
- If individuals are new to credit (NTC), they must have an NTC score over 150
Note: These are only indicative eligibility criteria. The criteria can vary across lenders.
Being a collateral-free credit, you can get a personal loan without much hassle. Still, you should apply for it only after comparing different loan offers and their terms. You need to check whether you qualify for their eligibility standards and whether the interest rate and charges are favourable. Additionally, you can follow all other rules, as mentioned above, to grab the best deals on loan.
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