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7 Useful Tips for Personal Loan Borrowers

Updated on: 14 Dec 2021 // 25 min read // Personal Loans
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When it comes to availing additional funds quickly and efficiently, you will only seldom find something that works as well as a Personal Loan. Right from their quick approvals, swift disbursals and the requirement of minimal Personal Loan documents to the freedom of end use, everything about this credit alternative is more than just appealing.

What’s more is that a Personal Loan is unsecured, and doesn’t need the borrower to offer collateral against the loan amount, which makes it exceedingly convenient for people who have little or no assets in their name, and don’t want to risk them. Not only does this feature make it easier for people to Apply for Personal Loans, but also speeds up the documentation and approval process.

While it is incredibly easy to Apply for Personal Loan, the knowledge of the following tips will make the process more productive, expedient and even cost-effective for you.

 
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Tip 1 – Carefully analyse your needs before applying for the loan

A loan should be seen as a long-term financial commitment that you would need to stand by, and repay the borrowed amount, complete with interest, in the form of equated monthly instalment (EMI).

Not only will the EMI result in an added financial responsibility on your shoulders, but you will also need to pay them religiously without fail, lest it will hurt your credit score and also attract a penalty.

Hence, it is crucial that you analyse whether you actually need the loan, and if so, what is the minimum possible amount that will work for you.  Make sure that your reason for taking the loan is truly justified, and that you aren’t going to splurge on unnecessary things like an expensive vacation or the latest gadget.

Tip 2 – Check your credit score before applying for the loan

While getting approval for a Personal Loan application is rather easy, there are certain aspects which may lead to the rejection of your application. One such aspect is your credit score.

Since Personal Loans are unsecured, lenders only have your repayment history to lean upon as a way of knowing that you will repay the loan as stipulated. Hence, having a score less than 700 will largely slim your chances of getting an approval.

We, therefore, recommend you to get a copy of your credit report beforehand and analyse. If your score seems low, you may wish to wait a while and make use of some of the tested measures to boost your credit score.

If, however, your purpose for taking the loan is of an urgent nature and you cannot delay the application, you should be prepared to service a loan with a comparatively high rate of interest. In some cases, the bank may even lend you a lesser amount than you initially applied for, as a measure to minimise the risk of defaults, if any.

Tip 3 – Shop around

This is possibly one of the most important tips, considering the vast pool of lenders that are competing for your attention. It is therefore extremely crucial that you set aside some time and do the gruelling work of comparing the loan offers from different lenders.

Here, rather than simply comparing the interest rates, you should also go ahead and analyse the additional charges levied by each lender, as these charges can significantly impact the overall cost of your loan. To help matters, you can seek the assistance of a trusted online loan aggregator like MyMoneyMantra, which will help you compare lenders with added ease.

Tip 4 – Check your eligibility for the loan

In most cases, the eligibility criteria for Personal Loans is rather simple. You simply need to be in the age group of 23 to 55, have a steady source of income, and have a good credit score, preferably 700 and above. Since the criteria may slightly differ from one lender to another, you must ensure that you meet the eligibility requirements of your chosen lender before you apply for Personal Loan.

Tip 5 – Know the pre-payment terms

Prepayment of loans is a great way to enjoy reduced tenures, and save on interest; however, most lenders levy a prepayment penalty which usually ranges from 1% to 5% of the outstanding loan amount, but may even be zero.

For instance, if you wish to foreclose your Standard Chartered Personal Loan account after paying a minimum of 12 EMIs, the bank doesn’t levy any penalty, whatsoever.  Since this can sum up to a large amount, you must know the terms of the prepayment early on. If you are an existing customer of the bank, you may even negotiate the terms of the prepayment to be in your favour.

Tip 6 – Avoid Filing Multiple Applications

By now, you must have understood the importance of a high credit score for getting a low-interest Personal Loan at favourable terms. In some cases, however, you may end up hurting your credit score by applying to multiple lenders within a short period.

This flurry of applications may lead the lenders to believe that you are in desperate need of funds and may not have the means to pay off the credit on time. Not only will this result in lenders shying away from approving your loans, but will also bring down your credit score thus further harming your eligibility to apply for a loan in the future.

Tip 7 – Wait a while before re-applying for a loan

In the unfortunate event when your loan application gets rejected, it is highly advisable for you to wait for a minimum of 4-6 months before reapplying, even if you are desperate to get access to additional funds. Since your application has already been rejected once, there are little or no chances for it to get approved in the second go. You must instead use this time to improve your credit score as well as consolidate your debts.

Remember, multiple application rejections may bring down your credit score, which is something you must avoid at all costs.

We hope that you are now aware of the most important tips that you must adhere to while on the lookout for a promising personal loan offer.

Also Read: Are You a Smart Personal Loan Borrower?

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.

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