Personal Loan: In today’s time personal loan has become a better option to meet the urgent need of money. Often people have very little knowledge about the rules and other features of personal loan. In such a situation, it is very important to know about the special aspects related to them. When you apply for a personal loan with the bank, the bank evaluates your eligibility on the basis of a few things before giving you the loan, credit score is one of them.
Having a good credit score determines the creditworthiness of the borrower and helps the lender decide whether to approve the loan application or not. A good credit score increases the borrower’s chances of getting a loan, whereas a bad credit score reduces the chances. Also, you should compare the interest rates of different banks while applying for a personal loan. This way you can get the best deal. Madhusudan Ekambaram, CEO and Co-Founder, KreditBee says, “The demand for personal loans is increasing. Due to better technology today one can get loan easily and in less time. Before applying for this, it is very important to know about some important things. There are a few things to keep in mind while choosing a personal loan. Here we are telling about them.
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loan amount
Borrowers fall into the debt trap when they get a loan which they cannot repay. Hence, it is advisable to take a loan keeping in mind the repayment capacity. Says Ekambaram, “Take a loan that you believe you will be able to repay on time. The personal loan EMI should not exceed 10 percent of the monthly income.
Avoid applying for multiple personal loans
Applying for multiple personal loans can hurt the borrower. Ekambaram says, “When a lender scrutinizes the application of a borrower, a lot of inquiries are made. Along with this the credit report of the borrower is also seen. The credit score of the borrower may get affected due to too many tough inquiries. Hence, applying for multiple personal loans is not a good idea even if you are in urgent need of money.
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Loan Tenure and EMI
Not striking a balance between tenure and EMI is one of the biggest mistakes that borrowers make while applying for a personal loan. For example, as a borrower, you can lower your EMIs by taking a longer term loan. This can help reduce your monthly repayment amount and free you from financial stress. But keep in mind that it can also increase the total interest you pay on the loan. Ekambaram adds, “To avoid the risk, one should know everything about the loan process.”
(Article: Priyadarshini Majhi)
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