5 factors to consider when choosing the right personal loan
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In recent years, taking credit has been made easier for people due to its digital presence. Loan applications have especially gained in popularity. Fullerton India instant personal loan application for salaried borrowers i.e. Fullerton India InstaLoan is the perfect example. This new popularity of loan applications can be attributed to their user-friendly interface.
There is a surplus of loans available in the market today, and choosing one can be overwhelming. As difficult as it can be, limiting it to one or two lenders is essential as not all are trustworthy. It forces borrowers to pay close attention to the terms of the loan. Here are some things to consider when take out a personal loan.
5 factors to consider when choosing the right personal loan:
– High creation costs
When financing a personal loan, some lenders and financial institutions may charge a set-up fee. These fees are usually a fixed amount that must be paid once your request is submitted or verified. While these fees are not unusual, borrowers should be wary of their amount. If you are offered with origination fees that amount to a significant percentage of your loan amount, this is a red flag that customers need to watch out for.
– Short repayment period
While it is advisable to repay loans as early as possible and not to go into debt, tight repayment deadlines are not ideal. A short payback period means there are fewer payouts, which makes the IMEs higher. Very often, borrowers tend to face financial hardship during the life of their loan, which slows them down. Because of these deadlines, you risk falling into the trap of more debt. In addition, a loan default negatively affects your credit score and will discourage lenders from extending your credit in the future.
– Calculation of the interest rate
While some apps offer regular personal loans with annual interest calculation, some may offer interest rates on personal loans on a monthly basis. These loans are known as payroll loans. There are also a few lenders who offer payday loans, which earn interest daily. But the most profitable are those that offer an annual interest rate.
– Duration and amount of the loan
Before applying for a personal loan, the most important factor to consider is the loan amount that you need to borrow. With the help of a EMI personal loan calculator, you can enter different durations as well as the desired loan amount to calculate the EMI obligation. Once you have calculated the amount using a personal loan EMI calculator, you can easily compare loan offers from different lenders and weigh them against your conclusions. It is a good idea to come up with an economical loan offer. You can also determine the likely interest rate for your personal loan with the online calculator offered by the lender of your choice.
– Credit rating
Your credit score is a major determinant of your eligibility for a personal loan. A credit score or CIBIL score is a 3-digit number ranging from 300 to 900 and reflects the creditworthiness of the borrower. It reflects your overall financial health in terms of disposable income, existing loans, borrowing, and repayment history.
The higher your CIBIL score, the more likely you are to get approved for your personal loan. On top of that, the loan amount sanctioned and the loan terms (interest rate and IME) are highly dependent on your CIBIL score. A CIBIL score above 750 is considered excellent for contracting a personal loan on favorable terms.
Taking all of these factors into account is essential when selecting a lender for personal loans. Sign up with a lender that offers competitive interest rates and a flexible repayment period to ensure your long-term financial health.
This article is created in association with Fullerton India.