In a world where dreams are woven with aspirations and ambitions, personal loans emerge as the threads that help bring them to life. Whether it’s turning a long-awaited vacation into a reality, consolidating debts to gain financial freedom, or transforming a house into a warm and welcoming home, personal loans are the catalyst for turning desires into tangible achievements.
What is a personal loan?
Personal loans are typically unsecured, which means they do not require collateral. Unlike specific-purpose loans, like a home or auto loan, a personal loan can be used for various purposes, such as consolidating debt, funding a vacation, paying for medical expenses, or making home improvements. Depending on the lender, the interest rate charged on personal loans may be fixed or floating.
Here are 4 key features you should consider other than interest rates before applying for a personal loan:
- Loan amount
When evaluating personal loan options, assessing the loan amount offered by different lenders is essential. Carefully analyse your financial requirements and borrow only what you genuinely need.
While accepting a higher loan amount might be tempting, remember to repay the entire sum with interest. Assess your financial situation, create a realistic repayment plan, and choose a loan amount that aligns with your repayment capabilities.
- Processing and pre-payment fees
While personal loan interest rates are crucial, evaluating a personal loan’s processing and pre-payment fees is equally important. The lender levied processing fees for the administrative tasks of processing your loan application.
Pre-payment fees, however, are applicable if you wish to repay the loan before the agreed-upon tenure. Compare the fees charged by lenders and opt for one that offers reasonable or minimal charges, ensuring you only pay what is necessary.
- Credit score
Your credit score plays a vital role in determining the success of your loan application. It reflects your creditworthiness and financial discipline.
If you have a low credit score, there are steps you can take to improve it, such as paying your bills on time, reducing outstanding debt, and maintaining a healthy credit utilisation ratio. A good credit score can improve your chances of getting loan approval. It also allows you to negotiate better terms.
- Loan tenure
The loan tenure is another critical factor to consider while selecting a personal loan. It determines the duration for which you will be making regular loan repayments. Longer tenures generally result in lower monthly payments but higher total interest over time.
Conversely, shorter tenures lead to higher monthly instalments but lower overall interest payments. Opting for a loan tenure that aligns with your repayment capacity can help you manage your finances more effectively.
At IDFC FIRST Bank, you can avail of a personal loan with industry-best interest rates and have the freedom to select flexible repayment tenures of up to 60 months, making it easier to manage your finances while achieving your goals.
To wrap up
When applying for a loan, looking beyond the interest rate is crucial. Consider your financial requirements, compare loan offers from multiple lenders, and choose the option that best suits your needs and repayment capabilities.