Five points to remember before applying for a personal loan

The requirement to obtain funding for a particular expense can arise at any point in time, and people can find it quite cumbersome to secure a source that can provide them with this money when required. Thankfully, there’s a solution to this ever-present need for instant funding – personal loans finance.

While most people find personal loans to be apt in satisfying these requirements, various factors need to be kept in mind before going through with this decision.

Stay within a pre-defined limit

The prospect of obtaining a large amount of funds instantly might tempt people to take a sizeable loan that will satisfy their current financial requirements, while also providing them with a cushion for a certain period. However, taking a loan that’s way beyond one’s paying capacity is not recommended – after all, a debt trap is better off avoided. Ideally, the total loan EMIs should never cross 50% of one’s monthly income, and that’s also an extreme situation.

Go for a shorter loan tenure

Again, the sentiment for this point is similar to what has been discussed above – it might seem like a financially feasible idea to go for a longer loan repayment tenure that spaces out EMI payments, thereby reducing the amount to be paid every month. However, the flipside to this is that the cumulative amount paid increases with a longer tenure. Thus, it’s important to look at the bigger picture and go for a shorter loan tenure. Yes, the EMI might be higher, but this financial obligation won’t last for long either, making this a desirable option in the long run.

Pay the EMI on time, without fail

Defaulting on a loan payment is not an ideal situation in the slightest, showcasing a lack of interest from the borrower’s side when it comes to honouring his or her commitments. This can happen due to several reasons, such as an extremely high EMI or unexpected payments. Borrowers should see to it that these EMI payments are mapped out beforehand to avoid this dilemma altogether.

Stay informed about the fine print

Reading is already losing steam in the modern world and having to read up on pages and pages of technical information is even more unappealing. However, one should understand that taking a loan is no small matter, and borrowers need to understand precisely what they’re going for when they willingly sign themselves up to a long-term commitment.

Maintain an acceptable credit score

The credit score of an individual – generally dictated by the CIBIL score in India – determines the credit-worthiness of a prospective borrower, providing banks and NBFCs with a fair assessment of the credit level that a person can be trusted with. Thus, to ensure that the loan-taking capacity of an individual doesn’t hit a snag, keeping this score favourable by keeping regular tabs on it is highly recommended.

By keeping these points in mind, a person will have a greater understanding of how unsecured personal loans work and why he or she should go for this incredibly helpful service. In fact, with the advent of new-age lenders like Clix Capital, the process of taking a loan has been streamlined to an extent where borrowers can obtain the funds they require without waiting for unacceptably long periods of time or enduring needless processes and paperwork.