Personal loans are an unsecured type of loan which means it does not require any type of collateral or security. Several banks, credit unions and online lenders offer personal loans at competitive interest rates. Lenders often look at factors like your credit history, credit score, income and sometimes employment to determine your credibility. The online process for availing a personal is quite simple and convenient. However, before applying for a personal loan you need to take a few things into consideration.
Things to do when you apply online personal loan
- The purpose of applying for a loan
Personal loans are an easy way to avail instant cash. But keep in mind these debts need to be paid off in time. So, you need to keep in mind the purpose of applying for the loan and avoid temptations that may lead to unnecessary spending. You can use the loan amount to clear your outstanding bill and other payments.
- Keep a track on your credit score
Your CIBIL report keeps a track of your past repayment on loans and credit cards. If you have a low CIBIL Score your online personal loan application might get rejected or you may be charged with a high-interest rate on the loan. With a good CIBIL Score the lender gets convinced that you will be able to repay the loan on time.
- Browse all available options
It’s best to do your research and look at other options available. Avoid moving ahead with the first available choice due to the dire need for funds. With a whole range of financial players flooding the market, chances are that you might miss out on the best offers if you apply without comparing your options.
- Check with the Terms & Conditions of the loan
This step is the most crucial part as a lot of people make the mistake of skipping the fine print on the loan agreement however it is advised that one should carefully go through all the regulations on your personal-loan to understand the terms. Also, make sure about service tax, processing fee, and other additional charges.
- Check Pre-approved offers
When you apply for an online personal loan you need to keep an eye out for lenders that offer pre-approved or promotional offers. This will help you access funds faster and with favorable terms and conditions. Hence before applying to ensure that the lender you choose is reputable and trustworthy.
Things to avoid when applying for a personal loan
- Missing your EMIs
Defaulting on repayment can have a negative impact on your CIBIL score, which will affect your chances of availing a loan in the future. So, decide why you need a personal loan and plan your repayment in advance to ensure timely repayments. Avoid overborrowing funds as it can cause a strain on your finances.
- Multiple loan inquiries
Some people tend to apply with multiple lenders to compare terms and offers on loans. However, too many hard inquiries will affect negatively on your credit score. While multiple loan applications can be treated as a single inquiry in your credit score, these single inquiries can cause your credit score to drop. Hence it is best to avoid applying for a loan with multiple lenders at the same time.
- Spend funds on non-essential expenses
It is best to avoid taking a personal loan just to finance lavish luxuries and only apply for it to take care of your essential requirements. A personal loan requires regular and steady repayment if you are not able to do so, this may lead to incurring penal interest and have a negative effect on your CIBIL score.