5 Things To Watch Out For When Taking Personal Loan

A personal loan can be a life-saver. It funds you during an urgent cash requirement. However, before borrowing, one must assess the terms and conditions of the loan – what the loan costs, what the tenure is, what the late payment fine is, and so on.

To get the ideal deal on a personal loan, make sure to keep these factors in mind.

Assessing Credit Score Prior to Application

Most financial institutions check a borrower’s credit score when assessing their creditworthiness and repayment capacity. They also only vet individuals with a certain income level before considering an application. There is a possibility for an application to be rejected on account of a poor or average score. Since your credit score changes every month, it is wise to get it keep a tab on it before applying for a loan. Just Google for “free credit report” and get yours for free in two minutes.

Interest Rate and Tenure

Personal loan interest rates are typically higher than other loan products such as home loans. This is because firstly they are given without any guarantor in most cases. It’s an unsecured loan where no security needs to be pledged to the lender.

Banks can charge anywhere between 11 per cent and 16 per cent on an average, whereas NBFCs and financial institutions may charge a higher rate. So make sure to work out the rates and given that these floating rates factor in around 2 per cent to 3 per cent rate fluctuations.