A personal loan can be your savior in times of financial crisis. While everyone is grappling with a cash crunch, the economy will still take time to recover from the pandemic.
The COVID-19 virus has affected our jobs, employment, professions, business, and hence, impacted our earnings and income. Add to this, the sudden and unexpected medical expenses. Travel has become costlier, and we are all tight on cash.
However, if you are faced with adversity and do not have the financial backing to support you or do not wish to liquidate all your savings or investment, online instant personal loans have got you covered. Owing to the increasing demand, many banks and NBFCs have entered this segment. Thus, increased and healthy competition ensures you get the best deal.
You might wish to consider the below factors before applying for your personal loan
- Compute what your requirement is and ensure to add a tolerance of at least 10% over the amount you need. This is because you can never precisely predict the volume of your urgent expense. Hence, calculate your requirement, and once you have arrived at an amount, you can check which financial institution is best suited to your interest
Interest Rate, Tenor, and, EMI
- Account for your regular cash flows and recurring monthly expenditure. Based on this you would understand what amount you can spare every month for your repayment towards the loan
- It would help if you also decided on a tenor – i.e. the period by which you intend to pay back the loan amount. The tenor should be such that you have a regular income until the expiry of the time. Further, the longer your tenor, the lower your EMI amount will be
- Once you have decided on these factors, you should research the market for the lowest interest rate that may be offered to you. Remember to check with the financial institution, as the interest rate would vary depending on many factors
Eligibility and Documentation
- Every personal loan application will require you to fulfill the criteria prescribed by the financial institution. Basic eligibility such as age, identity, citizenship, etc. will be checked by requesting documents such as your Aadhar card, pan card, passport, driving license, etc.
- Similarly, you will even need a regular income and a stable job. Your net income is considered, which is your “in hand” earning or the income after all tax deductions. Your salary slips, bank statements, tax returns, form 16, etc. would be required
- Hence, it’s advisable to keep these documents ready and understand the criteria before applying for the personal loan. Also, ensure that you fill out your details as per the documents you provide. Any mismatch in your application and documents might lead to rejection
- Your credit score is evidence of your financial worthiness before applying to check your credit score and ensure that it is a high and respectable number. You should always aim at a good credit score as this is the primary check for all lenders as an indication of your financial history
- Your credit score depends on several factors – how promptly you pay your bills, whether you have too many debts or loans, how frequently you have applied for loans, etc.
In conclusion, a personal loan should be taken only in case of an emergency and not be used for excessive spending. However, if you need the funds urgently, a personal loan is the best option as you can use it for any purpose you deem fit.