A personal loan is a multipurpose credit option that enables borrowers to access a significant amount and fund an array of financial requirements. Though personal loans help mitigate instant financial needs, they can add to expenses.
Hence, to make borrowing rewarding, individuals must refrain from getting overcharged for a personal loan. For instance, individuals seeking to apply for Rs. 5 Lakhs personal loan must consider all the parameters like seeking a lower interest rate, checking CIBIL score, etc. It will prevent them from paying extra and save a significant amount of money.
Top Three Ways to Avoid Personal Loan Overcharges
Applicants must consider the following ways to avoid paying extra on their loans:
- Opt for a lower interest rate
It is imperative for borrowers to research and compare different lenders before opting for a loan option. Exploring different offerings from other lenders will help borrowers settle for one extending competitive interest rates and better loan deals. Lower interest will reduce the EMI burden and bring down the cost of borrowing.
Furthermore, individuals with a healthy credit score have higher chances of securing lower personal loan interest rates. Borrowers must also check out the limited-period offers extended by financial institutions on the personal loan amount.
- Make prepayments
Loan prepayment is another effective means that will help individuals lower their cost of borrowing. In case individuals have received a salary hike or increment, they can go for making part or full prepayments of the loan principal. Full Prepayment of the loan amount will help individuals get rid of the loan burden entirely.
On the other hand, part-prepayment brings down the loan principal, which in turn brings down the loan term and helps reduce the loan expenditure. However, borrowers must also be aware of the prepayment penalty that lenders will levy on foreclosing the loan amount before the scheduled time.
- Check hidden charges
Besides opting for a lower interest rate, individuals enquire about hidden charges from their lenders. Hidden charges like processing fees, balance transfer costs, EMI bounce charges, late payment penalties, etc., contribute significantly to the loan expenditure. Considering the additional charges will help borrowers dodge the pitfalls that will overcharge them. Hence, it is important for applicants to read fine prints carefully, plan repayments and avail of personal loans from a reputed lender. Knowing about the hidden charges will help one plan their repayment schedule and avoid the unnecessary monetary burden.
Moreover, borrowers can choose shorter loan tenure to reduce the overall interest outgo. In this regard, they can use a personal loan EMI calculator.
It is equally important for individuals to check their CIBIL scores before making an application for a personal loan. A CIBIL score of 750 and above is considered ideal. As personal loans are not tied with any collateral, borrowers need to maintain a decent credit score. A lower credit score will lead to higher interest rates. It can also result in the rejection of loan applications.
Besides considering the cost of borrowing, it is important for borrowers to know the personal loan application process.
How to Apply for a Personal loan
With robust digitisation, it has become easy for individuals to compare different loan options and apply them from the comfort of home. Here are the steps to help one apply for a personal loan online.
Step 1: Firstly, visit the official website of the preferred lender and select ‘Apply Online’ to get redirected to the online application form.
Step 2: Fill out the online application form with personal and income details. Attach necessary documents.
Step 3: Select the desired loan amount and check for the loan terms.
Step 4: Submit the loan application.
On successful submission, a representative from the lending institution will contact and take the remaining application procedure ahead.
To receive quick loan approval and better loan terms, borrowers need to abide by the eligibility criteria. In this regard, one can use a personal loan eligibility calculator as it will help them know the loan amount they are eligible to borrow.
Individuals will have to provide their age, financial liabilities, monthly income, loan tenure, interest rate, and ongoing EMIs to get an idea of the maximum personal loan limit they qualify for. It will help them estimate loan amounts that they can afford and repay them comfortably.
To sum up, individuals can make the most of a personal loan only if they keep the cost of borrowing and EMI liability under check. Therefore, while applying for a high-value loan amount of Rs. 5 Lakhs personal loan, it is important for borrowers to opt for lower interest, plan a repayment schedule and go through the loan terms thoroughly. In this way, borrowers can avoid paying extra and efficiently sail through the repayment tenure.