We have all been in a situation where we had felt the need to borrow a certain amount of money on short notice. Be it paying for a vacation, or to cope with any untoward situation, it is entirely possible that not everyone has the amount of finance on hand needed to pay off their expenses. In this kind of situation, one might ask for help from friends or family, but nowadays, the option of Personal Loans is becoming increasingly popular. A personal loan is any amount of money that a financial institution can lend you for whatever purpose you desire. Personal loans are paid back in installments to be paid on monthly basis along with interest added to it. Personal loans are usually unsecured, that is, they are not backed up by collateral. The interest rate for personal loans hovers around 6% to 36% depending on your creditworthiness.
Why Do People Prefer Personal Loans?
Personal loans can be used for a variety of reasons, such as paying off medical bills, purchasing something, or debt consolidation. They are called personal loans specifically because of the fact that they aren’t lent out for a certain determined purpose like a home loan or an automobile loan. Personal loans have to face huge misconceptions of being labeled as scams meant to cheat the common man as they are shady and expensive. This is not true because personal loans are completely safe and regulated by the government, and they are not often too expensive and are very affordable if you make the right decisions.
A unique utility of personal loans is that they can be taken in case you want to do debt consolidation. Debt consolidation is a process through which you go ahead and take a fresh loan in order to pay off your current debts and liabilities. If you are already facing credit card debt and loan repayment, you can take a single personal loan that covers the entire amount and then do away with the hassle of multiple loan payments. The benefit of taking personal loans for debt consolidation also includes lower overall rates of interest and a longer term for repayment all of which lessens the burden of loan repayment on individuals.
The purpose of this article is going to be to tell you about a few considerations needed to qualify for a personal loan and tips to save your money, along with how this entire process can be done through Saral Credit for a safe and convenient borrowing experience.
Qualifications for Personal Loans:
As personal loans are given entirely based on a person’s metrics of creditworthiness, banks and lenders end up being extra careful in selecting who they want to loan out to, so that they do not have to face the risk of defaulters. To fulfill this purpose, lenders such as Saral Credit have a few metrics to assess whether an individual qualifies for a loan, and if so, what are the terms of the loan, such as interest rate, monthly installment amount, and total loan term.
1. Credit History: The most important factor in determining creditworthiness is to consider a person’s credit history. Credit history means your history or experience in dealing with loans. This includes the loans that you have taken, loan fulfillment, timely payments, and all other factors that indicate you are a dependable credit repayment record. A good history conveys to banks that if they lend to you, you will honor the loan term and not default on your payments.
Your credit history is tracked via a standard credit report that is prepared by various credit rating agencies. In India, the popular ones are CIBIL, High Mark, and Experian. These rating agencies give you a numeric credit history score that depends on your credit history age, and timely payments. It is very uncommon for banks to tender personal loans to people without a Credit Score because otherwise, they have no way to assess whether the person is credit-worthy or not. Because of this, it is highly advisable for you to get your own Credit history score checked to confirm your chances of getting the loan. In fact, as per RBI regulations, you are entitled to one free credit report in the beginning.
2. Income: The largest thing that proves that you can pay back your loan is your income level. Banks care about your income, because if you aren’t even earning the amount of money that you are borrowing, then there is no chance that you can pay it off in a timely manner. Let us take a simple example. Assuming I have no savings, and I earn 1 Lakh every year, no bank would be willing to lend me a personal 20 Lakhs, because that would take me at least 20 years to pay off just the principal amount. As you can see through the example itself, it is absurd for any bank to consider lending to people who do not earn enough to pay back the loan in the near future. Because of this, consider your regular income while applying for the loan to ensure that the banks feel convinced that you are dependable.
3 Outstanding Loans: Even beyond the matter of creditworthiness and credit history, banks also take note of the existing loans that you have to pay off. It is entirely possible to take out multiple loans at the same time. By itself, it does not represent bad lending habits, because if your income allows, it is sensible to take more loans. However, what banks care about is the load that your existing debt places on you. The point here is to judge that if the person is already burdened with a loan payment, will they have enough money to pay off the loan that they are taking from you. This is why banks will not lend to individuals who have a high amount of outstanding debts.
Tips to not lose out on Personal Loans:
Taking the right personal loan with the right terms is a very important decision. There are several factors relating to taking a personal loan that can bite you in the back if you are careless. The possible damage caused by reckless borrowing includes financial problems, reduction in credit score, all of which lead to you not having money or being able to get a loan when you need it the most. These tips are here to help you out and make sure you don’t commit any mistakes.
1.Know your credit score: Before taking any loan, you should be aware of your credit score. If you aren’t maintaining a good credit score, banks are much more likely to give you unfavorable terms to mitigate the risk of default. This includes charging higher interest rates, larger monthly installments, and a shorter term. All of this ends up stressing more financial burden on the borrower. Planning ahead to maintain your credit score has several benefits. Firstly, you have much greater chances of your loan request being accepted by the banks. Secondly, banks will offer you much more lenient interest rates and payment times. In the long run, this can be achieved by ensuring you have strong credit discipline which creates the potential for you to save thousands of rupees in loan repayment.
2. Only borrow what you can pay back: It is easy to misunderstand taking personal loans as getting money that you’ll never have. A healthier way to look at loans is that you get your future wealth right now in a lump sum. Every borrower has to stay aware of the fact that the loan they take has to be repaid along with interest. This means they have to ascertain whether their future income can sustain the loan repayments. People cannot forget that their income is going to be spent on things other than paying the monthly installment. If I end up foolishly taking a huge loan, in the future, I might end up finding that I am left with less money to spend on my essentials like food or clothing. In another scenario, in order to survive my monthly expenses, I might start facing trouble repaying the loan. This problem is easily solved by staying within our means and only loaning the amount you can confidently pay off in the future.
3. Explore your options: People often take personal loans in times of financial crunch. Because of the urgency that they face, many people end up overlooking the essence of doing their homework and end up taking the first loan that they get. This is a bit reckless. Citizens should understand that even banking is a competitive industry. There is always someone else who can provide you the same service. Consumers should explore all the available options in the personal loan market and only take the loan from a bank that provides them the best terms. Smart research can end up benefiting you greatly in the long run. Nowadays there are many websites that help you compare personal loans and banks.
4. Consider Alternatives to Personal Loans: The rate of interest is often higher in personal loans. Alternatives such as loans secured with collateral such as gold, real estate, properties, and securities. Another way to explore alternatives is to see whether your need for money can be fulfilled using a specific loan type. For example, if you take a personal loan to buy a new house for your family, or for the education of your children, borrowings such as house loans or education loans are much smarter options. These types of loans potentially offer much easier interest rates and the possibility of the loan being accepted is much greater because the loan is secured. It is advised to keep personal loans as a sort of a last resort that you take only when you have exhausted all other forms of raising finance.
5. Don’t miss payments: Now obviously, not missing payments is not much of a tip if you’re having difficulties raising the money. Surely, if you followed the other tips, you would be in a position where you can repay loans on time by lessening your monetary burden, hence improving your credit score. However, people end up missing out on loan payments for non-financial reasons as well. Being forgetful or careless about your monthly loan payments not just reflects poorly on your credit history, but can make it financially more difficult on you because of accumulating interest and debt burden.
Why you should consider Saral Credit for Personal Loans:
Saral Credit is a financial lender that wants to make loans ‘Saral’ or easy and comfortable for their customers. This vision inspires them to provide the best possible personal loans to you. Saral Credit aims to eliminate the burden of borrowing money, a process that is conventionally very complicated and leaves the customer with too many unresolved questions. Saral Credit is honest and upfront, and it gives fair loans to customers without any hidden fees or conditions.
Taking a personal loan from Saral Credit is an extremely simple and hassle-free procedure. The amazing features of Saral Personal loans are:
- Affordable interest rates ranging from 6.80% to 7.85%
- Monthly EMIs starting at Rs. 652/Lakh every month
- Tiny processing fees of 0.1% to 1% of the total loan amount that was borrowed.
- Comfortable maximum loan tenure of up to 30 years.
- No requirements of having a guarantor to secure your loans.
- No pre-payment and pre-closure charges.
What Saral Credit offers you over other credit agencies is a strong and robust network of experienced advisors. The advisory panel serves the single purpose of serving you. Experts will ensure that you get the best bang for your buck and have loan terms that are convenient for you. They will also provide you guidance on your credit score, the requirements of the loan, and whether you should try any alternatives or not.
So with all these amazing upsides go to Saral Credit right now!