Check your eligibility for Personal Loan
Article by Hardeep
Personal loans are useful while you are in a mark and need some urgent cash. However, personal loans are complicated and you require knowing as much as possible about their basics before apply personal loan.<strong> Calculate the low interest rate loan offer</strong>: Personal loan come with very high interest rates ranging from 14 percent to 24 percent. Compare interest rates and get the complete picture by understanding the annualized interest rates for each offer.
Then figure out the total amount of repayment you need to shell out with all the offers before opting for the loan of your choice.
<strong>Processing fee:</strong> You need to keep in mind the processing fee and other fees that will be levied when you apply for your personal loan.
<strong>Prepayment penalty check</strong>: Ask upfront if there would be any penalty payments for prepayment of the loan at any point in time. More often than not loan consumers tend to pay up their loans earlier than planned to be rid of debt. Hence, it’s important to know if your personal loan offer allows part prepayments.
If that is the case, then you should be aware from what time frame in the loan period you can start prepaying and understand the cost you incur due to such prepayments in part or full.
<strong>EMI and tenure:</strong> Evaluate all loan offers. The first condition for loan offer selection is the total money outflow that the loan will cost. The second factor is the EMI. A loan offer with a lower EMI and a longer tenure may seem attractive, as it could be easy on your purse strings, however not all such loans prove to be cost effective in the long run.
Hence, first calculate the total loan cost and then try to opt for a higher EMI, which you can comfortably manage to enable shorter loan tenure.
<strong>Keeping track of your credit history:</strong> Especially in the case of unsecured loans, your credit history, which is recorded by CIBIL (Credit Bureau India Limited), plays a critical role in your loan application being accepted. A good repayment track record ensures not only an instant loan approval but brownie points in the form of more attractive interest rates.
<strong>Eligible for a personal loan</strong>
The eligibility criteria and their specific details may differ from banks to bank based on their perception of the risks associated with given out personal loans. However, nearly all banks divide the potential borrowers into three categories:
<strong>Salaried individuals</strong><strong>Self employed individuals</strong><strong>Self employed professionals</strong>
Other factors which are taken into consideration are, age, residence, work experience, repayment capacity, past obligations and place of work.
<strong>Documents are required for personal loans</strong>
Personal loans require the least number of documents, making it the fastest to be approved. Typically, financial institutions would require proof of identity, residence, income and also 3 to 6 months of your bank statements. Some banks also require guarantors and the same set of their documents.
<strong>Alternatives to a personal loan</strong>
You could also utilise investments you might have made so far, like shares, securities, fixed deposits, gold, insurance policies etc. You can pledge these as collateral and obtain a loan against them.
The interest rates would definitely be lower compared to the personal loan interest rates, which can help you, save on the interest cost.
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