Opting for credit is a long-term financial commitment. Not only does it require you to adhere to a rigorous repayment schedule, but also puts you at the risk of losing out a few points on your credit score if you default on your payments. Considering the stakes of such a credit, it is crucial for you to know and understand all about them before applying. It is for this very reason that we have consolidated a list of ten questions that you ought to ask before you Apply for a Personal Loan.
Even when you have decided that you have to opt for a Personal Loan, you must understand that there is a wide variety of options that you can avail. Right from a Festival Loan to a Travel Loan, from a Wedding Loan to an NRI Loan to Home Renovation Loan, the loan you must take will differ on the basis of your situation, and on your end use of the loan amount.
The Annual Percentage Rate (APR) for a Personal Loan usually varies from 11% to 22%. In some cases, the rate may be less than 11% or more than 22% depending on the lender you choose, as well as your own credit history. Since the APR varies largely, it is bound to have a significant impact on your equated monthly instalment (EMI), as well as your overall cost of the loan. Hence, it is essential to be sure of the interest rate, before you apply for the same. To this end, you can ask the bank to conduct a soft check, and analyse your credit score. On the basis of this score, the bank will be able to give you a close estimate of the interest rate. Based on the same, you can them use a Personal Loan EMI Calculator.
Most lenders charge an upfront processing fee of 0.5% to 2%, and in some cases, this fee may even go as high as 5%. Since it can easily mount to a significant sum, you should make it a point to inquire about this cost before applying for the loan.
Pro Tip – If you have been a loyal customer of the bank, that you are seeking your loan from, you can negotiate the processing fee, and even place a request for a waiver in the same.
In addition to the aforementioned interest rate and the processing fee, there are numerous other charges that you may have to bear when it comes to Personal Loans. These include:
You must ask the lender to lay down all such additional charges for you so that you can draw an estimate of the overall cost of the loan.
You may ask the bank for a specific loan amount. However, when all of the above-mentioned charges are added to this amount, your loan estimate may increase by a few thousand rupees, and in some cases, even a few lakh rupees. Hence, you must ask the bank for the loan estimate so that you can be mentally as well as financially prepared to bear the cost of the same.
Ina vast majority of cases, banks levy a prepayment penalty in order to discourage the borrowers from paying off the loan before the end of the stipulated tenure. This penalty may vary from 0.5% to 2.5% of the outstanding loan amount. Since prepayment is one of the most efficient ways to repay your loan in a timely manner, while saving on the interest outgo, you must be aware of the prepayment charges beforehand. If the circumstances allow, you must leverage your goodwill with the bank, and ask for a lower prepayment penalty, or get it waived completely.
Usually, banks need the borrower to be between 18 and 55 years of age, with a good credit history, preferably with a score of 700 or above. The lender would also need you to have a steady stream of income, along with stable employment. In some cases, however, the lender may have some additional criterion for eligibility as well. To see whether or not you meet those criteria, before filing your loan application.
Most banks ask for your identity proof, your proof of employment and that of your income, to process your personal loan application. Just in case, you banks need some additional documents such as your PAN Card, Proof of Ownership of Home/Office, Bank Statements, Photograph etc.; you must be aware of the same.
Personal Loan application is renowned for getting quick approvals. More often than not, the applications take less than one day for getting approved but might take additional time. In case, you need the funds urgently you must clarify the exact time that it will take.
This is yet another question that you must ask your bank officials. While it often takes less than 3 to 5 days for the loan amount to reflect in your account, but it is advisable to get this information up front.
We hope that you are now aware of some of the crucial question that you must have the answers to, before applying for a Personal Loan!
Also Read: 9 Must-Read FAQs about Personal Loans
To apply online for Credit Cards, Secured Loans and Unsecured Loans, visit www.mymoneymantra.com, the leading online lending marketplace that offers financial products from 70+ Banks and NBFCs. We have served 2 million+ happy customers since 1989.