Financial emergencies can be unprecedented, and an abundance of funds is only sometimes available for some. The culture of lending and borrowing has been fundamental to the economic development of nations for centuries. The advent of technology and flexible rules in the financial framework has drastically transformed how lending organizations operate globally. The most popular loan is the personal loan application, which most people prefer because of zero collateral, instant disbursement, and easy application.
Although certain factors are considered while approving these loans by the banking institutions, such as income, credit score, and identity documents, there are also certain tips and tricks that the borrowers should adopt to make the most of any instant personal loan app. As no asset or collateral is involved, lending institutions are at greater risk, charging higher interest rates than home or car loans. Keeping this in mind, let’s find ways borrowers can optimize the borrowing process.
- While applying for a personal loan online, such as a loan for students, being sure of the most affordable interest rate is the crucial factor to consider, as many banking apps and websites are available for this. Comparing and contrasting the rates effectively will help the borrowers make an informed decision. Customers can also call the agents of the banks to get more clarity on the rate of interest they offer and other details.
- The total cost incurred while opting for the personal loan is not limited to the EMIs, but there are miscellaneous charges involved, such as processing fees, service tax, late payment charges, cheque bounce charges, etc. These prices may add up to make personal loans costlier than users think.
- Another hidden cost that most of us ignore is the pre-payment charges that the borrowers pay for the early closure of the loan. Mostly it varies between 2-5% of the remaining amount, but a short calculation using an instant loan app should be done to check if this amount is less than the interest rate for the outstanding amount. If it is, then pre-closure is the best option to save on your pockets.
- Checking for the affordability of EMI is of utmost importance because the purpose of taking a personal loan is to save yourself from undergoing any debt or default. Landing up with the same in the process of loan EMI payment is a sheer immaturity. Any loan app has an EMI calculator available online that can calculate the exact amount of monthly payment one must make depending on the principal amount and the interest rate.
- Maintaining a good credit rating is always a boon regarding loan eligibility because the higher the credit score, the greater the chances of getting your desired amount with a feasible interest rate. Your credit score is a testimony of your financial conditions and how well you manage your finances. This instills a sense of security and trust among the lenders.
Personal loans are a great way to deal with any financial pinch. Being an unsecured loan, one can easily avail of it without worrying about providing any security or asset. There are also no spending constraints with funds received until and unless the illegal activity is involved.