Getting a personal loan is now easier than ever before. With the advent of technology and digitalization, you can get an instant loan through loan apps. Owing to this tight competition in the personal loan market, conventional lenders are also adopting new policies that have made the process much simplified. Though getting a loan has become much easier today, there are a few basics that you must know to make the most of your finances. Knowing the tricks to get the best interest, the lowest processing fees, avoiding penalty charges and more can help you save a lot.
Tips to Avail a Personal Loan That No one Has Ever Told You
1. Check your detailed credit report before you apply for a loan:
This is a very crucial step in the process of applying for a loan, but it often goes undone. Checking your credit score provides a lot of information and a strong bargaining position. Check what is your credit score and apply to lenders who offer the best deals to people in your credit score range. If you have a strong credit score, then tell the loan agent beforehand and ask them to get you the best possible offers on the loan.
2. Try to borrow during lean seasons:
There are many reasons why you should consider festive seasons for applying for a loan. This can differ from state to state and market to market. The last quarter of the year is generally the festive season so many lenders come up with great deals on loan products. If you missed this season,the first quarter of the next year can also get you better deals because lenders consider this to be a lean period. They also have their financial year targets to meet so they can be flexible with offers.
3. Ensure that your KYC documentation is flawless:
There are several cases where people have been denied loans because of discrepancies in their KYC documents. Some people may have spelling differences in the first or last name onthe PAN card and Aadhaar card. Sometimes there may be slight differences in their addresses. Many lenders tend to view these differences in the KYC documentation with a raised eyebrow and may want to use this as an excuse to push products that may not be in your best interest. Ensure that all your paperwork is in proper shape and is accurate.
4. Borrow from an app over a conventional lender:
Gone are the days when conventional lending institutions ruled the roost with their slow processes and atrocious terms and conditions. The emergence of new technology has given rise to loan app companies which have completely revolutionized personal loans in India. These apps offer much better interest rates and charge lower fees. Plus, with a loan app, you can borrow money anywhere and anytime if you are connected to the internet.
5. Make sure to check the processing fees or any hidden charges:
When you take a loan, the lender may charge you processing fee. This is generally a small percentage of the amount you are borrowing. However, many times, there may also be hidden fees that may be mentioned in the fine print. It is very important to read every term and condition very carefully and understand what you are expected to pay. Though most lenders tend to run ethical businesses, it is always wise to do your due diligence.It is always better to read the terms than paying unexpected charges.
6. Adjusting the loan amount can get you better interest rates:
In several cases, the lenders grade the loan interest rate and other charges based on the loan amount. That means if you go for a lesser loan amount, your interest rate can also lessen drastically. This is why it is better to have flexibility with the borrowing amount. This is one thing where the loan app works in your favor because you can easily find out various offers by adjusting the borrowing amount then and there.
7. Try changing the loan duration for better interest rates and fees:
Just like lenders tend to grade loan interest and fees with the amount to borrow, many lenders also grade these relative to the duration for which you want to borrow. If you are borrowing a loan for a longer duration, the risk associated with your loan account becomes high, because of which the interest rate charged by your lender also shoots up. Going for a shorter duration not only offers you a better interest rate but also reduces your overall interest payout. In a loan app, you can easily find out if adjusting the loan duration can get you a better deal on the interest and fees.
8. Explore offers from lenders you may have borrowed from in the past:
Lenders tend to pay a lot of attention to people who are returning borrowers. This is very important in cases where borrowers paid their previous loans in time and without any missed EMIs or loan default. You should first check with lenders with whom you have active or previous loans because they will always try to offer you the best possible deals.
9. Do comparison shopping for loans:
If you do not have an active loan or if you are not satisfied with what your previous lenders are providing, you can do comparison shopping. Plus, with the loan app, it has become much easier for anyone to do comparison shopping for loans. You do not need to travel from office to office and everything can be done right from your phone.
10. Always maintain some emergency funds:
As counterintuitive as it may seem, you should always maintain money equal to two months of your earnings in a bank account. This can help you tide over most of the income loss risk that can occur. You can take care of your EMIs and monthly expenses from the money you saved and keep on looking for alternative sources of income in the meantime without any impact on your credit score.
When availing a loan, no matter which lender you choose, the most important thing is to do the due diligence. Make sure that you read and understand the loan terms and conditions. Get a good understanding of the calculations involved. Read to know all about the penalty charges, penalty waiver clauses, foreclosure terms, foreclosure fees, loan transfer clauses, and more. Always remember that you can use personal loans as very useful financial tools, but they should be used sparingly and with extreme financial discipline.