Aladdin just had to rub a magical lamp and make a wish. A genie would appear right after and grant him the wish. But you are not Aladdin. You cannot reach for that elusive lamp whenever you have a need. Sometimes, you may have to take a personal loan to meet that need.
Fulfilling your goals may take a back seat if you lack financial support. Personal loans can help you reach your goals faster. But there are so many options in the market today. You may find it confusing to know what is most suitable for you. No need to worry. Here are some tips on how to pick out a personal loan that works for you.
- Make sure your monthly income has room for the EMI:
While picking out a personal loan scheme, consider when you can repay the loan. Get a loan that you have a need for. Do not borrow more even if you are eligible for a higher amount. Take into account all your other monthly expenses. This could include credit card payments, house rent, and tuition fees. Does your monthly income not have room for a high equated monthly installment (EMI)? Then try to get a lower EMI. But keep in mind that a lower EMI also means more interest in the longer run. This is because to reduce the EMI, you increase the tenor. This pushes up your total interest cost. So, if your monthly income allows it, go ahead and pick the higher EMI. This is also an option if you’re expecting a rise in income which will allow for a higher EMI. Also, ensure that your total EMI payments do not exceed 50-60% of your monthly income. Do you have multiple personal loans? Then think about consolidating them into one loan.
- Check that your CIBIL score is good enough:
Every lender checks your CIBIL score. They do this to determine whether you are eligible for the loan. Having a poor credit history could make you ineligible for a personal loan. If you have a poor CIBIL score, take measures to improve it. You can achieve this by paying your EMIs on time. If your CIBIL score is less than 700, improve it before applying for a personal loan. (To know why this is crucial, click here)
- Ensure that you have a regular income:
Most lenders grant loans to customers who can repay the loan. Check for the eligibility requirements of the lender. For instance, salaried employees at a reputed company are more likely to get a loan. There are personal loans for self-employed businessmen and professionals as well. You could be looking at online personal loans or inquiring at the lender’s office. Start by checking what category you fall under. Based on this, you can check your eligibility, you can also use online Eligibility calculator to figure out that you are eligible or not.
- Know what you need the money for:
Do you need money to buy a second car? Keep in mind the time frame in which you need to repay the loan. Pick a personal loan with a tenor you are comfortable with.
- Keep in mind the applicable charges:
Most lenders charge processing fees, prepayment fees, and late payment fees. Understand what the applicable charges are. Also, calculate the interest payable using an online EMI calculator. A longer tenor means higher interest charges. A shorter tenor means lower interest charges. Choose a loan that you do not have to repay over many years. Also, look at loans that allow partial repayment or foreclosure at minimal charges. Look for any clauses that mention extra charges and read the fine print.
You cannot book a flight without doing some homework. In the same way, selecting personal loans online or offline requires some planning. Follow the steps listed above to find a loan that meets your needs.