9 Pre-steps to Know before Applying for a Personal Loan from Bank
The uncertain economic environment in present times is responsible for more families staring at their financial uncertainties. The situation might take several months to become normal; as such, you must have an alternate source of finance ready to support your family. Availing a Personal Loan has emerged as a popular option with individuals facing a temporary crunch in cash flow. While the process of Applying for a Personal Loan has been simplified significantly over the years, there are several steps involved in the process.
It is important to take due diligence when you are opting for an urgent loan, especially during unprecedented emergencies like the one we are facing today. To ease your borrowing journey, we are outlining below 9 pre-steps to know before you apply a Personal Loan:
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- How much you need: First and foremost, you need to ascertain the exact amount that you require and how you will be able to repay it. The interest rates applicable to Personal Loans hold significance. So, if the money remains idle in your bank account, the interest cost alone will burn a hole in your pocket. It is highly advisable for you to avail of the amount you actually require.
Let’s understand this with an example. Say you have a Savings Account with RBL Bank and preapproved for a Personal Loan up to Rs 10 Lakh. You might get tempted to apply for the maximum limit available. However, the decision to borrow should not be based on the temptation to exhaust the limit just because it is available. Instead, Apply for RBL Bank Personal Loan according to your needs.
- Check your credit score: Now, the next step is to check your credit score. As Personal Loans are unsecured advances, financial institutions require you to have a good credit score. If your credit score is 750+, it will significantly improve your chances of being approved for a higher loan amount at lower interest rates. But if your credit score is below 700, it is advisable to work on improving your credit score before applying for a Personal Loan. So, you must monitor your credit score regularly and take corrective actions as and when required. In case you need money now, you can consider availing a secured loan against a fixed deposit or other securities. Opting for emergency Personal Loan is also a good option.
- Identify the lender: There are numerous financial institutions offering Personal Loans in the market. The following step thus becomes absolutely necessary for you. You need to explore various available offers and check eligibility criteria pertaining to age, work experience, monthly income, profession, etc across the lenders. When you are looking for a Personal Loan, apply only with those lenders who are offering the amount you require and whose eligibility criteria you can satisfy. By avoiding unnecessary loan applications, you not only save a significant sum of money but also protect your credit score.
- Determine the EMI: Most lending institutions offer the facility of a free Online Personal Loan Calculator. By entering basic details like the amount, time period, and interest rate, you can easily and accurately calculate the EMI amount you will have to serve. This approach will help you strike the right balance between the amount required as a loan and the EMI that you can comfortably serve, reducing the chances of default. You can also determine the duration for which you will need the loan using this method.
- Check the interest rates: Checking the interest rates is an absolutely essential step as it is directly related to the affordability of the loan. As a Personal Loan is a long-term liability, even a slight reduction in the interest rate can be extremely beneficial for you. Different lenders offer different Personal Loan interest rates, so you must compare the rates & lending terms. For instance, the interest rate for a Saraswat Bank Personal Loan has been fixed at 14.40% per annum, whereas if you opt for an HDFC Bank Personal Loan, the interest rates start from 10.75% and go up to 21.30% per annum.
- Compare other key factors: The next step requires you to compare other key aspects of the Personal Loan offering. Foreclosure charges, processing fees, penal interest rates, cheque bounce charges are some of the most important aspects of a Personal Loan. A comparison will enable you to ascertain the most suitable loan for your requirements. You must read all the terms and conditions specified by the lender carefully and feel free to ask any questions that you might have.
- Submit your application: Now that you have ascertained the most suitable offering for you, it is time to submit your application. Most lenders accept the applications through their website, wherein you just need to enter your basic details and upload your scanned documents. Alternatively, you can also opt for submitting the loan application at a branch of the bank. Just make sure that you have all the documents ready before starting the application process. Also, provide valid contact details as the lenders will communicate using those details only.
- Keep tracking the progress: After you have submitted the application and paid the processing fee, you will receive an Application Reference Number. This number can be used to track the progress of your Personal Loan application. You must keep a close eye on the loan process and should provide additional documents as and when required by the lender. This will help expedite the approval process.
- Disbursal and repayments: If your loan application is approved, you will receive an intimation from the lender. Then you will need to sign the loan agreement and several other important documents. Thereafter, the amount will be transferred to your bank account, or you can also opt to receive the amount through a banker’s cheque or demand draft. Your EMI repayments will start from the next month on the dates mentioned in the loan agreement. Ensure that the account has sufficient balance at least three days prior to the EMI debit.
By following the steps mentioned above, you can easily complete your Personal Loan application and improve your chances of being approved. Though, it is pertinent to mention that you must exercise your due diligence before reaching a final decision.
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