Do you know when is the right time to take a personal loan?
A few years ago, getting a personal loan was not that easy. For a personal loan, the person had to submit his proof of income like salary slips for the last 3 or 6 months, income tax returns and many other documents.
But today, getting a personal loan has become very easy. Most banks and financial institutions disburse loans within a few minutes of applying from their website/app.
The result of this easy availability of personal loans is that now we do not need to submit a lot of documents and wait for approval from the banks.
Since a personal loan is an unsecured loan, its interest rate is higher than any other secured loan. Generally, the interest rate on personal loans ranges from 10% to 36% per annum.
An unsecured loan means that the person does not need to pledge anything with the banks/financial institutions.
The right time to take a personal loan
Unlike any other loan, personal loans can be used for multiple purposes like weddings, vacations, home renovation, financial emergencies etc.
But the question is when is the right time to take a personal loan?
The right time to take a personal loan is when the terms and conditions are in your favour, such as low interest rates, low processing fees, etc.
You need to look for different lenders to know which bank/financial institution offers the lowest interest rate and processing fee rate on personal loans. You can easily find these details online.
The processing fee is the amount that the bank/financial institution charges on the loan amount. These processing fees are deducted at the time of disbursement of the sanctioned loan amount. However, interest is charged on the gross loan amount which includes the processing fee. So, the lower the processing fee, the higher the net loan amount you will get in your bank account.
Finding a low-interest personal loan is not so tough nowadays. Many banks are offering personal loans at a 10% p.a. interest rate. You can online check the rate of interest charged by various banks. This helps you to compare the rate of interest of various banks and help you to get the loan at the lowest interest rate possible.
You may also like: – 6 ways to repay your loan faster
How to get a low-interest rate personal loan?
Nowadays it is not so difficult to get a personal loan with a low interest rate. Many banks are offering personal loans even at an interest rate of 10% per annum. You can check the interest rate charged by different banks online. This will help you compare the interest rates of different banks and get a loan at the lowest interest rate.
Following are the few factors which can help you get a personal loan at a low interest rate
Credit Score
A high credit score i.e. 750 or above will help you get a personal loan easily. To improve your credit score, you must have a history of paying off all your dues and loans on time. A high credit score results in better negotiations with lenders and it also gives the lender the confidence that the loan given to you is less risky. Credit score not only helps you get a loan at a lower rate but also plays a very important role in deciding the loan amount and repayment period. In simple words, a high credit score will help you get a personal loan on your favourable terms and conditions.
To improve your credit score, it is always advisable to repay all your dues on time. Even a single delay in EMI can negatively impact your credit score.
Income
Apart from the credit score, banks also verify the income to check the repayment capacity of an individual. A good income with little or no existing debt helps an individual to get a loan at a low interest rate.
Banks ask for some important documents before disbursing a personal loan. One of the most important documents is the salary slip of the individual seeking a personal loan. A good salary will help you to get a loan easily.
Employer Credibility
If you are working in MNCs, PSUs or any reputed organization, your chances of getting a loan approved are much higher than a person working in any small firm.
This is because the credibility of these MNCs is higher than any other employer. A high employer credibility provides you with a more stable job with a good income.
As a result, top executives of reputed organizations get loans very easily on favourable terms.
Existing Lenders
If you have taken a loan from a bank/financial institution, you should consider taking a personal loan from the same bank. The reason for this is that any bank offers personal loans to its existing customers at comparatively lower interest rates due to the relationship.
Salary Account
If you are a salaried person, you can get the best deal by using your salary account. The bank where you have your salary account easily gets your monthly income and withdrawal details. These details help your bank to determine your repayment capacity. Usually, we see that salaried individuals get pre-approved personal loans from the banks where they have their salary accounts. This is because the bank already has the income proof, employer details and the expenses incurred by the individual based on his withdrawal behaviour. Hence, it becomes very easy for a salaried person to get a personal loan with minimal documentation and that too at a low interest rate.
Conclusion
I hope that this comprehensive guide has given you some idea that what is the right time to take a personal loan with the lowest interest rate possible. In case of any suggestions, please let me know.
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