When you need money to shop or pay medical bills, a credit card is not the only option available. You can avail a Personal Loan to manage your expenses rather than relying on a credit card. It is not only easy to apply for an instant Personal Loan, but also more affordable. This is because Personal Loan interest rates may often be more competitive than credit card interest rates, especially on dues that are unpaid in full. NBFCs offer you a Personal Loan up to Rs.25 lakh at an affordable interest rate. You can opt for a flexible tenor ranging from 12–60 months over which you can repay the loan comfortably.
You can easily apply for a Personal Loan online by submitting your personal, financial and employment details and the loan amount will be disbursed to you within 24 hours.
The lender will verify your application before approving it, so you must ensure that you meet the Personal Loan eligibility criteria and fill in all the correct details in your application. You must also know the reasons for Personal Loan rejection and how to avoid them to make sure that your loan application is approved without hassles.
While you do so diligently, do not forget to be aware of certain Personal Loan terms that may result in making the loan more expensive than you had planned. Here is a checklist of things you should look at before or while applying for a Personal Loan.
This is a type of loan that adds up your pre-computed interest into the amount financed to you as a loan. This means that the interest is calculated when the loan is sanctioned and is not calculated as payments are made on the loan. So, if you choose pre-computed interest loan, you end up paying higher interest in the initial years of your loan. Here, even if you part-prepay your loan, you are going to pay high interest on the remaining portion of the loan. So, clarify this factor before you decide to apply for a Personal Loan.
Lenders levy an origination fee on your Personal Loan, which is the charge for processing the application. This fee is a percentage of the loan amount. To ensure that you get a loan on lower origination fees, compare the Annual Percentage Rate (APR) of your loan for various lenders’ offerings. This is owing to the fact that when the lender charges APR, it is bound to include the origination fee. In case you do not find the origination fee inclusive of the APR, disregard that lender. However, remember that this fee is unavoidable and is a part of the lending mandate. So, getting the loan on the lowest percentage of origination fee inclusive of APR will help you get a better deal. For instance, you need to borrow Rs.1,00,000 and 2% is the lowest origination fee, then make sure you borrow Rs.1,02,000 and only apply with lenders who accept this offer.
Lenders, mostly banks, have to mandatorily hold a caution fund with the RBI each time they lend money as a loan. So, whenever you try to foreclose your loan or make prepayments towards your principal, it is likely that the lender will charge you a fee. This is a direct amount that they receive from you in order to pay RBI to free their caution funds before the tenor is up. On the other hand, NBFCs operate through a lenient process, so lenders have the flexibility to charge a nominal or nil prepayment fee on your Instant Personal Loan. Thus, assess the extra charges and then avail a loan to keep this option open for you in future.
Insurance combined with the Loan
If you want to shield your family and keep them financially prepared for emergencies then getting insurance is imperative. However, you may want to choose an insurance provider based on your preference and decide the policy based on your financial capability. Alternatively, you may already have a number of insurance policies for your and your family’s credit. However, a lot of online Personal Loan lenders force you to take an insurance policy alongside your loan. Avoid such plans; the premium is likely to increase your EMIs unnecessarily.
So, if you want to avail Personal Loans with ease, be wary of these common Personal Loan traps and avoid them.