A personal loan is the easiest, and the fastest one can get. The approval duration from the financial institution for the loan amount is 5 minutes, and the money transfer takes a maximum of 72 hours! A personal loan is also a viable option because unlike other loans your financial institution does not
ask for any collateral. Also, the lender does not keep track of where you have been using the funds. Hence, you have complete freedom as you are not restricted to use the funds in one particular way. However, before you apply for a personal loan, it is important that you know whether you will be
able to repay your loan in the given tenor with interest.
Before applying for a loan, it is required to look at your financial ability and stability to repay the loan. To know more, follow the personal loan eligibility criteria:
● Income: You must have a stable income over the past few years. Also, the savings from your income will decide whether you are financially stable to repay the loan in the given tenor or not.
● Loan Amount: Your loan amount depends on the amount of money that you require. However, the EMI (Equated Monthly Instalment) that you pay will be more if you apply for a greater loan amount.
● Loan Tenor: The loan tenor is the time period you take a loan for. The time period to repay a personal loan is 2 to 5 years. Hence, it gives you the time to do expense and savings planning.
● Interest Rate: The interest rate for a personal loan is fixed but varies from lender to lender. The interest rate is extremely important as it defines the interest amount that you pay. It is advisable that you compare the interest rates of different financial institutions before
making a decision to apply to any.
● Credit Score: Credit score is your credibility when it comes to repaying a loan. The financial institution that you are applying to will check your credit score and decide whether to approve the loan or not. An ideal credit score for you to get your loan approved is 750.
However, a Non-Banking Financial Company (NBFC) might consider giving you the loan if your credit score is below 750.
● EMI Calculator: The website of financial institutions provides Online EMI calculators. The calculator considers your loan amount, loan tenor, and the fixed interest rate and then displays your EMI. With this, you can decide whether with your current income you will be able to pay off the loan.
Also, if you are a salaried employee, the financial institution will check your credit history. If you have any ongoing EMI’s or loans taken, the lender will deduct that much amount from your monthly net income. Hence, after all these deductions, the lender will calculate your salary and then decide
on your personal loan amount.
Hence, if you are considering to get a personal loan, these are some things that you should keep in mind. You need to be sure about your ability to pay off the loan and also manage your expenses accordingly.
Interest amount forms the majority of EMIs that you have to pay initially. However, as the loan tenor progresses, the repayment of principal increases and repayment of interest decreases.
Therefore, you must know that the EMI amount will not decrease as the interest rate remains the same throughout the loan tenor.