From buying a new phone to purchasing a house, every financial decision requires careful contemplation. And more so if you’re thinking of opting for a loan, especially a personal loan. After all, a loan comes with numerous commitments and obligations.
That’s why you must consider all the options available before shaking hands on a loan deal. To help you get started, here are the top five questions you must ask before getting a personal loan.
1. Do I really need a loan?
The first question you must ask yourself is whether or not you need a loan. If you’re looking for funds for equity investment, it’s best not to go for a loan, as there are many risks associated with such ventures.
However, if you’re looking to cover a medical emergency, consolidate your debts, or make a big-ticket purchase, personal finance will be the right choice.
Additional Read – 10 Questions to Ask Yourself When Applying for a Small Business Loan
2. What’s my credit score?
As you may already know, personal finance is an unsecured form of debt. Meaning, you don’t need to pledge any of your assets as collateral to the lender to get the loan. As a result, lenders require you to have a high credit score to qualify for a loan.
So, if you’ve already decided to opt for personal credit, make sure you check your credit score before applying. Because if your score is on the lower side, your application may be rejected or you may be charged higher personal loan interest rate.
3. Can I afford the EMI?
Before applying, carefully scrutinise your finances. As a rule of thumb, make sure the EMIs take up only 15-20% of your monthly income. Anything above that can prove to be a financial burden in the future.
For lower EMIs, go with the lenders offering affordable interest rates or allow you to customise your repayment schedule. For instance, if a lender has a flexible repayment structure, you can opt for a longer loan tenure to reduce the overall EMI amount. Using a personal loan EMI calculator while planning can help you out.
4. Am I eligible?
Apart from the credit score requirements, lenders also have other personal loan eligibility criteria you must fulfil. These usually include age, income, and employment requirements.
So, make sure you go through all the criteria carefully before applying. Non-fulfilment of requirements can lead to your application getting delayed.
5. Can I prepay the loan?
Many lenders charge prepayment or foreclosure fees if you try to close the loan early. So, it’s best to review all the prepayment charges before finalising the loan deal, as it can help prevent nasty surprises in the future.
Additional Read –First Time Personal Loan Applicant: Things to Consider
With all these questions answered, you’ll have clarity on:
- Whether or not you need a personal loan
- Whether you qualify for a loan or not
- Which lender you should go with
If you’re facing a financial emergency, want to consolidate your debts, or have a big-ticket purchase lined up, Tata Capital’s loans for personal use can help cover all your financial needs.