Financial hardship may come at any time but how will you fight it. You may bank upon loans, especially on personal loans, but how would you guarantee it you will get it on time. It is the process you need to apply for a personal loan? Or you need a specific set of information that will smoothen the journey of your loan application? If you want a process that will help you secure a personal loan easily, then read this blog.
Because personal loan is an unsecured form of loan, mostly, lenders examine the borrower’s credit report carefully. A credit report includes your payment history and credit score, but only borrowers having a credit score of 750 or more get the personal loan easily. A credit score shows your credibility as a borrower and helps a lender to assess the risk involved in lending. However, the applicant having a low credit score can get a loan but at a higher rate of interest rate. While in the cases of secured loans like car loans, home loans, and loans against property, collateral plays a crucial role. These loans mostly backed up by the security so the lender sanctions a loan without monitoring your credit score.
Assume you apply for ICICI Bank personal loan and if you have a strong credit score, then you can avail a personal loan up to Rs 20 lakh.
Thus, it’s important to track your credit score regularly because it maintains good health of it. Besides this, also avoid approaching multiple lenders as every credit enquiry gets recorded in your credit report and risks your creditworthiness.
A higher interest rate can make the repayment difficult, so always compare it with different lenders. The interest rate for the personal loan is determined on several factors like your creditworthiness, income, age, employment history, credit score, etc. Therefore, lenders may offer a loan for different interest rates. For example, ICICI Bank personal loan interest rate ranges between 11.25% p. a. and 22% p. a. So, being a smart borrower, you must compare the interest rate of various lenders then choose a lender at your convenience. To compare the interest rate of various lenders, you need not make the enquiry with the lender as you can check this online at a credible fin-tech platform.
Generally, the repayment tenure varies between 1 to 5 years. However, some lenders are offering even a longer tenure up to 6 years. But as a borrower, you must know, lower tenure means a higher amount as EMI and lower interest but a huge burden. On the other hand, longer tenure means a lower EMIs and higher interest along the repayment phase. Thus, you must keep your EMIs at a manageable level without burdening your finances. In other words, if you can repay the loan faster, you must choose a shorter tenure. But always remember that shorter tenure can imbalance your debt-to-income ratio and your application may be rejected. To choose an optimum loan tenure, you can take advantage of the EMI calculator. Suppose you want to take an ICICI Bank personal loan, then you can use ICICI Bank personal loan EMI calculator as it calculates your future EMIs, total interest that you will pay during the loan tenure.
Processing fee is borne by the lender when they process your personal loan application, which includes administrative charges, cost of credit checks, and more. However, the lender doesn’t pay the processing fee himself, instead; he asks you to pay it at the time of loan disbursal. It usually ranges between 0.5% and 3% of the loan amount, while some lenders may charge a flat fee. Assume you take an ICICI Bank personal loan, the bank will charge a processing fee of 2.25% of the loan amount. So, before selecting a lender, ensure to check the processing fee because, in case of big-ticket loans, it may be a whopping amount.
Prepayment and Foreclosure Charges
A borrower can close the loan before the tenure or he can pay a bigger payment to save some money as the interest. When a borrower goes for it, he needs to pay an amount as a prepayment penalty or fee to the lender. Generally, prepayment/foreclosure charges range up to 5% of the outstanding loan amount. For instance, ICICI Bank charges a 5% prepayment fee on the outstanding loan amount. However, some lenders let this happen only after a certain period. By choosing a prepayment or foreclosure, you can save a whopping interest on your loan. So, if you are planning to prepay the loan, choose a lender who has a minimal prepayment or foreclosure penalty.
In case you find anything confusing, contact customer care to get clarity of the charges, fee, eligibility criteria, and documentation. To connect with a customer, you need not pay anything as most of them have toll-free numbers. Suppose, to track ICICI Bank personal loan status, you will need to dial these toll-free numbers given below.
1860 120 7777,
1800 103 8181,
1860 120 6699
Before applying for a personal loan, a borrower should feel the risk of lending an unsecured loan. Only then you will understand the importance of credit profile and the risk surrounded with it. If you handle your credit score well, then you will get lower interest offers from various lenders that will help you save a sizeable amount as interest. Besides this, always choose a personal loan with flexible tenure and sign only those loan applications which offer a minimum processing fee.