Top Questions You Should Ask Yourself to Determine If You Are Financially Ready for a Personal Loan

From arranging funds for your company, funding your vacation to meeting your emergencies, a personal loan can allow you to meet your goals or needs by bridging fund shortages. Moreover, availability of instant personal loan in the form of pre-approved loans can help you avail the personal loan proceeds instantly in situations of urgent fund requirements. However, before you opt for it either through personal loan online or offline mode, it is crucial to be well versed with all the implications attached with it.

Have a look at some of the crucial questions that you should ask yourself to know your personal loan eligibility chances:

• Have you inculcated the habit of checking your credit report periodically?

Credit reports may consist of incorrect info due to clerical issues on part of the lender or bureau. Also, credit reports may involve incorrect credit applications/transactions conducted in your name. The incorrect data can affect your score and thus your loan eligibility. Reviewing your report regularly will help you identify and rectify these issues. A rectified report can enhance your score automatically. 

Having an enhanced score, helps boost your personal loan eligibility as credit score is given the maximum weightage by lenders when approving your loan application. 

• Have you maintained a disciplined credit repayment behavior?

Defaults and delays in repaying your credit card or loan EMI not only attract huge penalties but also negatively impact your credit score. Credit scores equaling 750 and above usually hold higher credit card and loan eligibility chances. Of all parameters considered by credit bureaus for setting your score, your past repayment record is often given preference. Any delay or default in your loan or credit card repayments are directly reported to the bureaus by the lenders, which lead to a steady increase in your score. A higher score leads to increased personal loan eligibility.

• Have you avoided comparing with multiple lenders within a short span for availing any credit option?

Each credit application that you submit makes lenders evaluate your credit report to understand your credibility. These applications with lenders directly are classified as hard inquiries for which the credit bureaus reduce your credit score marginally. Thus, ensure to avoid such direct applications with multiple lenders in a short time span. Doing so can reduce your credit score massively, which lowers your personal loan eligibility and eligibility for other credit options. Instead, visit online lending marketplaces to enquire about personal loans. Enquiries submitted with these platforms are known as soft inquiries, which do not impact your score.

• Have you considered various lenders?

Before zeroing on any lender, it is important to conduct a thorough research and consider lenders across different parameters to avail the best deal. Avoid basing your decision just on personal loan interest rate as various other parameters like processing charges, prepayment fees etc., also determine your overall cost of loan. Visit online lending markets to check different lenders based on your credit score, income, job profile and other criteria. Also, you must connect with NBFCs and banks with whom you already share a relation as they might provide you with a loan at lower personal loan interest rate and better terms and conditions.

• Have you evaluated your EMI affordability?

Know your EMI affordability by reducing your existing EMIs, mandatory monthly expenditures, SIP contribution, insurance premiums etc., from your monthly income. Remember, many lenders prefer your entire EMIs, which must include your new loan EMI to be under 50-60% of your monthly income. Once you are aware about your personal loan EMI affordability, select the shortest tenure to lower your interest outgo. However, when doing this avoid compromising your contributions to your financial goals to choose higher loan EMI. This may affect your future goals negatively. Use the personal loan EMI calculator to know your optimum personal loan EMI as per your repayment capacity by adjusting your tenure in the calculator.  

Conclusion

The best time to ask such personal loan linked questions is not before submitting the loan application. This is because the need for personal loan is usually unannounced in nature. As credit score is given the highest weightage when approving your loan, improving your score right before loan application is impossible. As an outcome, either you may not make a cut or may avail the loan at a higher interest rate. Having a positive mark on the above pointers indicates higher loan eligibility chances i.e., you may click on the personal loan apply button at the drop of a hat.