5 lakh A personal loan or personal loan of the above amount up to Rs 40 lakh can be used for any purpose, whether for personal or business purposes, that is, it has no no end-use restrictions, unless used for speculative purposes. However, note that even if you look forward to obtaining personal loans from a reliable lender at lower personal loan interest rates with favorable terms and conditions, a comparison between different lenders becomes crucial in choosing the right one. Along with this, you should also go through the various criteria set by different lenders to understand the ideal lender for yourself.
Here we have mentioned below some important tips / factors that you should focus on when going for a personal loan to get the most out of it. 5 lakh personal loan or a personal loan of a higher amount at affordable personal loan interest rates:
Examine your credit rating and repayment capacity
You must maintain an excellent credit rating to benefit from a 5 lakh personal loan or a higher amount personal loan and wondering what is meant by a credit score? A credit score is one of the key factors that lenders check when evaluating your personal loan application to judge your creditworthiness. Your credit score is determined by the 4 credit bureaus which receive data from your lenders and issuers to establish your score.
The credit report prepared by each bureau is reviewed by lenders to judge your reliability as a borrower. Your credit behavior history with any past debt gives your lenders an idea of your future behavior if you borrow.
In addition to your credit history, which they understand from your credit report, lenders even assess your repayment capacity. For those with higher disposable income, lower financial liabilities, their chances of getting approved for a personal loan are higher than those with lower income and higher financial liabilities. Personal lenders take a personal loan applicant’s repayment capacity into account when evaluating their personal loan application. Typically, lenders prefer applicants’ EMI involving their personal loan IME and other existing IMEs to be less than 60% of NMI of net monthly income or RMG or gross monthly income. Those who exceed this fixed limit are less likely to qualify for a personal loan approval.
So, to increase your chances of home loan approval, applicants should consider keeping their loan repayment obligations within 60% of their NMI or GMI. This can be done either by reducing your existing debts by entering them, or by choosing a longer repayment term.
Note also that the EMI personal loan is fixed according to personal loan interest rates offered, the loan repayment term and the loan amount used. While a lower EMI results in a higher repayment term and higher interest expense, a higher EMI results in a shorter repayment term and lower outflow of interest charges. So, personal loan applicants should get help from online personal loan EMI calculators to know their optimal EMI based on their repayment capacity. To fully understand their optimal EMI, personal loan applicants should consider their mandatory monthly expenses, monthly contributions to critical goals, rent, insurance premiums, and more. Applying for a personal loan after knowing your optimal EMI can reduce your chances of a defaulting EMI personal loan due to unforeseen aggressive loan repayment schedules.
Compare interest rates and personal loan deals.
As the personal loan interest rates, processing fees, loan repayment terms, etc., can vary depending on the lenders’ cost of funds and their assessment of the personal loan applicant’s credit risk. Be sure to compare as many lenders as possible before selecting the final lender. Start your personal loan research by connecting with your banks and NBFC with whom you already share an existing consumer relationship to benefit from a better deal on personal loans such as lower personal loan interest rates, etc. This should be followed by approaching the online financial markets to compare the personal loan interest rates & other terms and conditions offered by other banks or lenders. This would help you get the best personal loan deal with the lowest price. personal loan interest rates, optimal loan terms and adequate loan amounts.
Do not check with several personal lenders in a short period of time.
Every personal loan application you submit prompts the lender or issuer to use your credit report to understand your creditworthiness. These requests that are made directly with the lenders are called hard inquiries; each of these inquiries results in a sink in your credit score. Therefore, directly applying for a personal loan from various lenders in a short period of time can lead to a drastic reduction in your score and hence lower the chances of your personal loan being eligible. Instead, approach online financial markets to compare the different lenders available on your monthly income, credit score, job profile, etc. considered non-binding inquiries, and they do not affect your credit score.
Check the prepayment charges.
Prepaying a personal loan early, whether in part or in full during the loan repayment term, can help you lower your interest costs. Because the RBI has prohibited lenders from charging prepayment fees on variable rate loans, personal loans with variable interest rates do not incur any prepayment charges. However, in the case of fixed rate personal loans, prepayment penalties can be up to 5% of the outstanding principal. In addition, lenders could also cap the number and number of prepayments allowed during the overall loan repayment term. So, personal loan applicants who are able to repay their personal loan in the future should prefer a lender with little or no prepayment fees and limitations.
Add a co-borrower
Those with lower personal loan eligibility due to low credit scores, insufficient income, etc. The inclusion of a co-borrower reduces the credit risk of the lender, as the co-borrowers also become responsible for repaying the loan both in the absence and in the presence of a primary loan applicant. As the income of a co-borrower is even taken into account when evaluating personal loan applications, looping a co-applicant can even help qualify for a higher personal loan amount, if necessary.