5 Things to Check if You Are Applying for a Personal Loan First Time

There is always a first time for everything in life. This holds true for your credits as well. If you are setting out on the search for your first Personal Loan, the chances are that you may be unaware of the specific nuances pertaining to this much sought-after credit type, which can be used for any purpose you deem fit, without any restrictions from the lender, whatsoever. It is for this very reason that we have listed down some of the most crucial aspects of this loan for you.

1. Credit Score

As you may know, Personal Loans are unsecured and don’t need you to offer collateral to the lender against the loan amount. This increases the risk propensity for the lender, which is why they heavily rely on your credit score to analyse your repayment behaviour. Hence, before you Apply for a Personal Loan, make sure to check your credit score. Only if your score is 700 or above should you go ahead and apply. If not, you must take the requisite measures to boost your score. This will help you in getting the loan at the desired Personal Loan interest rate.

2. Eligibility Criteria

Most banking and financial institutions have their own set of eligibility criteria. However, a vast majority of lenders, require the age of the borrower to be between 21 and 55 years, and in some cases between 18 and 60 years. You must ensure that you fall in the age bracket as specified by your chosen lender before filing your application.

Yet another criterion of prime importance is your income. Most lenders mandate you to have a steady source of income, which may be in the form of the salary you draw, your business revenues or your income from your professional practice. This is considered as a proof of your ability to repay the loans.

Some institutions also make it easier for you to procure the credit if you work for a reputable corporate organisation. Then, there are others who would need you to be in the same field of work for a minimum of 1, 2 or even three years, to consider you eligible for the loan.

To this end, it is best if you get in touch with your lender beforehand and see if you fulfil the criteria or not. In case, you are lagging on one or more fronts; you can get in touch with the lender to negotiate the same. If not, you can approach a lender who is more likely to be accommodating to your current situation.

3. Rate of Interest

Personal Loans often attract higher rates of interest as against other forms of credit. Personal Loan interest rates usually vary from 11% to 22%. Since the interest rates directly impact your EMI, you should shop around to gain the least possible rates that you can qualify for.

4. Additional Charges

Personal Loans often attract a wide variety of other charges such as Processing Fee, Documentation Fee, Late Payment Charges, and Prepayment Penalty. These charges vary from one lender to another. You should, therefore, understand the extent of these charges beforehand, to avoid any unwanted surprises later on. If need be, you should not estimate from reading the fine print of the loan agreement.

5. Employer’s Reference

If your loan amount is seemingly high, your lender may get in touch with your current and in some cases, even previous employers to gain insight regarding your income, your employment history, and other relevant details.

We hope that you now have a clear understanding of some of the most crucial aspects of a Personal Loan. Considering you meet the eligibility criteria for the loan, and that you have the desired credit score, obtaining an HDFC Personal Loan or any other such credit for that matter, should not take more than 2-3 days. That being said, you must ensure the efficient repayment of the same to maintain your credit score, and give your creditworthiness the much-needed boost!

Also Read: Avoid Making These Mistakes When You Apply for a Personal Loan

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