The demand for personal loans has grown at a scorching pace in India. Primarily because these loans do not mandate any collateral, can be availed online, and have flexible repayment tenures. Whatever the reason may be, if you are looking for a convenient finance option for any end-purpose, personal financing is the way to go.
However, even though this finance option is convenient to avail, there are a few personal loan rules you must keep in mind while borrowing one. These include:
Maintain a healthy credit score
Since personal finance is typically unsecured, meaning you can avail of it without pledging a guarantee or collateral, you must maintain a good CIBIL score.
Your CIBIL rating is a measure of your creditworthiness for the lender as it helps them assess your chances to repay the loan on time. The CIBIL rating scale ranges from 300 to 900, and the higher you go, the better are your chances of getting a loan at competitive personal loan interest rates. Most lenders favour borrowers with a credit score of 700 or above.
A score lower than 700 will also get you personal finance but at a slightly higher rate of interest. To maintain a healthy credit score, ensure that you pay your credit card bills and ongoing loan EMIs on time.
Additional Read: Tips to Improve Personal Loan Credit Score
Check for foreclosure or prepayment charges
After availing of personal finance at fixed EMIs, a time may come when you have enough money to pay off your entire loan well before the tenure is over. This is called prepayment and is done to reduce the total interest outgo on loan. And once you prepay your entire loan amount, the lender will provide you with a foreclosure letter.
Specific lenders also charge a high fee for prepaying or foreclosing your loan. You can check the exact foreclosure charge in your loan document. Make sure to go through these additional costs carefully. If you can’t find them in fine print, ask your lender separately. In any case, best to go with a lender who charges a nominal or no prepayment fee.
Enquire about hidden charges, if any
The prepayment fee is not the only charge mentioned in the loan papers. There may be several others, such as processing fee, default penalty, etc. Therefore, before taking a personal loan, be aware of any hidden charges and budget for them while applying.
Additional Read: Tips to Save Money through Personal Loans
Here are two tips for you before we sign off! If you ensure a good CIBIL score, your loan eligibility will automatically be high and approval swifter. Secondly, make sure you take a day or two reading the entire loan contract before signing below the line.
Are you looking for personal loan? If yes, then turn to one of India’s most trusted lending institutions – Tata Capital. We offer a loan for individual use at affordable interest rates, flexible repayment tenure and minimal paperwork.
And if you want to figure out your monthly EMIs with us before applying, log on to our website and use our personal loan EMI calculator to assess affordability.
For more information on personal finance at Tata Capital, visit our website today!