9 Personal Loan Tips &Tricks for Successful Loan Application

    1. Proper Research Pre applying for Loans

Once you decide to avail a loan, you will come across information that may sound beneficial to you. This may come from not-so-well-known financial blogs or websites. However, it is important to read the fine print before you apply and get the funds. Hence, before availing a personal loan, it is important to do your due diligence so you are well aware of the process, charges, etc.

Instead of being caught unawares, conduct ample research about the financial institution you want to avail the personal loan from. Compare the terms and conditions of the top lenders before deciding on a lender. Research is one of the most important personal loan tips that all borrowers should follow.

   2. Evaluate the need for a loan

Applying for a loan is easy. However, before you do so, ask yourself why you need to avail a personal loan. Create a checklist to evaluate your reasons. If you are truly short of funds and are hesitant to use your savings, a personal loan can be what you are looking for.

  3. Check credit score

A really important tip to get a personal loan is to have a good credit score. A credit or CIBIL score is a three-digit number assigned to you after evaluating your financial history. A credit score is considered to be proof of an individual’s creditworthiness. Before you send in your personal loan application, check your credit score to get a fair idea on whether your application will be approved or not. An important point to keep in mind while checking your credit score is to understand   that a credit score reflects how much of a loan and of what amount has an individual taken from a particular financial institution. In the case that a potential borrower has not taken any loan from the particular institution and it still reflects in his/or her credit score, the potential borrower needs to report this to the particular institution. 

A score of 750 and above is considered to be a good CIBIL score. If you are a first-time borrower, ensure that your credit report mentions NA (Not Applicable) or NH (No History) so that your application does not end up in the reject pile. 

  4. Eligibility

An important Personal loan tip is to meet all the eligibility criteria mentioned by the lender. Eligibility criteria include the age group, employment status, steady income, and availability of the required documents.

  5. Check the interest rate

The interest rate is an amount that is charged by the lender while availing a personal loan. This interest rate, which is calculated in percentage, varies from lender to lender. Before availing a personal loan, check the rate of interest as provided by various lenders.

Find a suitable lender that provides you with an affordable interest rate that will fit your repayment plan. For instance, Finnable disburses personal loans with an interest rate ranging between 16% to 26%. A vital personal loan tip and trick to remember is that with a good CIBIL Score, you can negotiate with your lender to lower your interest rate.

Do keep in mind, Finnable charges interest on a reducing balance method as compared to most lenders who charge a flat rate of interest. Interest charged on reducing balance method basically means that the interest payable on each installment = Outstanding loan amount x interest rate applicable for each installment. This means that as the borrower pays each installment and the principal amount decreases, this also leads to which in turn reflects on the effective interest rate and reduces the monthly outgo or EMI as compared to most lenders.

  6. Avoid multiple loans

Another important personal loan tip is to avoid having too many loans. Though loans help you during an emergency, too many loans give the lender the impression that you are unable to clear your old dues and cannot be considered as a trustworthy borrower. 

  7. Decide the tenure

The tenure is the time frame through which you repay your loan. Choose a repayment tenure in such a manner that it does not add any excessive financial burden on your budget. You can use a personal loan EMI calculator and use various permutations and combinations to find the tenure that is suitable for you.

  8. Enquire on any additional charges

Almost every financial lender charges processing fees, documentation fees as well as various sundry charges while disbursing a personal loan. Some lenders are also known to collect pre-payment charges if a borrower wishes to close his loan before the stipulated time. A personal loan tip to keep in mind is to get a clear idea about the additional charges that the lender may levy upon you. It is also imperative to read the fine print before signing on the dotted line.

  9. Repayment affordability

Once you avail a loan, you will need to repay the lender. This repayment is done in the form of monthly payments known as EMI. You can use a personal loan EMI calculator to find out how much that amount will be. Once you know the amount, ensure that you check your monthly as well as yearly financial budget to understand if you can repay the loan on time. If not, it may not be a wise decision to avail a loan at that point in time.