Most of us have often felt the need for instant cash at one time or the other to meet an emergency or some personal need. Faced with such a situation, people often apply for a personal loan to get instant cash and meet their respective needs. Applying for a personal loan seems the easy way out to people because the loan does not need any collateral besides the disbursal being instant, provided the borrower has the required income and good credit history.
Sometimes, in a hurry to get a personal loan, people don’t pay heed to the cost of loan acquisition and thus go on to pay much more later. At times of an emergency, owing to the time constraint, even the most intelligent borrowers fail to pay attention to costs. But otherwise, if one is planning something like a travel or home construction or a renovation or maybe buying an asset like a car, etc., one has time to do some introspection and look at all aspects. In this post, the incidences have been listed out when one should apply for a personal loan in such a way that the cost is reduced. Let’s discuss further to know the details.
Which is the Most Appropriate Time to Apply for a Personal Loan?
The most appropriate or the right time to apply for a personal loan will be when one gets a comparatively lower interest rate besides zero processing fees, etc. Not only should the cost of the loan be less, but one should also get sufficient money from the lender to meet the needs for which the loan is taken.
How to Get a Personal Loan at the Best Interest Rate?
Whenever a loan is disbursed without any collateral, the loan interest rate is generally high as the borrower does not need to submit any collateral or security. The rate of interest can be as high as 25% per annum across different banks or lenders in India. But lately, this rate has come down to even 10% in some banks. In order to avail of the lowest interest rate, one is required to have a credit score of 750 or more with an excellent repayment track that shows no spot for payment delays.
Besides Credit Score, What Else the Lenders Generally Check to Offer a Lower Interest Rate on a Personal Loan?
We all know that an excellent credit score goes a long way to grab a lower personal loan interest rate deal. But it is not the only criteria that the lenders check before providing any such deal. The income of the borrower has to be sufficiently high. Besides, it should not be too high if one has any existing credit card or loan obligation. These points increase the borrower’s repayment capacity, prompting the lender to accept the borrower’s request to lower the rate on a instant personal loan. In addition, if the borrower works in a top organization, his chances of getting a lower rate loan increase. It is generally seen that sometimes special rates are offered to persons working in top organizations.
Let’s understand the scenarios when one can make the best use of a personal loan:
- Home improvement:
Taking such a loan is a good idea when it comes to renovating your home without putting it as collateral. Another plus point is that as the tenure is comparatively less so, one doesn’t have to carry the burden for long.
- Apply for Loan with Higher Interest Rate:
If one already has an existing loan with a higher interest rate, then taking a personal loan with lower interest to repay it is a good idea. This way, the borrower can reduce his interest substantially.
- Going for higher education:
If one is planning to opt for higher studies, taking a personal loan is a good idea. The loan money can be used for paying the education fees, hostel accommodation, daily expenses, etc.
Money plays a substantial role in our lives as money is needed for almost everything for basic survival, to lead a good life, for the fulfillment of one’s desires, or for any travel. But any monetary decision should be taken wisely when it comes to debt because it is better to be safe than sorry.