Availing a personal loan online today is easy. The documentation is minimal, the disbursal of funds is quick, and the overall process is seamless. So, it can be tempting to click on that personal loan apply online button when you need some additional funds. Before you do that, however, here are some dos and don’ts you should keep in mind:
- Do have a repayment plan in place
Before you apply for a personal loan online, you need to have a loan repayment plan in place. Make sure to use an online personal loan EMI calculator to determine what your EMI obligation will be and if you will be able to comfortably pay it on time regularly. Defaulting on your personal loan EMI will increase your financial burden, impact your credit score, and may even lead to legal proceedings if you fail to clear your dues. Hence, while it’s easy to opt for the personal loan apply online option, you need to ensure to apply for a loan amount that you can afford to pay back.
- Don’t go for the first offer you get
Often, banks will offer you preapproved personal loans, especially the bank with which you have a savings account. This will make the personal loan application process easy because the documentation required will be minimal and the loan disbursal will be quicker. However, it’s important that you research and consider your options. In addition to comparing the personal loan interest rate that different lenders are offering, you need to consider other terms such as fees to choose the option best suited for you.
- Do check your credit score
Whenever you apply for any type of loan, the lender checks your credit score to see what your loan repayment history has been like. This helps them assess your creditworthiness and whether you are a high-risk borrower. Depending on this, along with other factors such as your income and age, the bank will offer you a specific personal loan interest rate. The higher your credit score, the lower your interest rate will tend to be. Hence, ensure that before you apply for a personal loan online, you check your credit score. You can check your credit score online too within a few minutes through your bank.
- Don’t take a personal loan for all purposes
One of the benefits of a personal loan is that you can utilise the funds for any purpose. There are no restrictions on what you choose to use the loan money for. In other types of loans such as a home loan or a business loan, there is only a specific purpose for which you can use the money. However, a personal loan being an unsecured loan tends to have higher rates of interest compared to other types of loans. So, if you want to use the money for a purpose for which a specific secured loan is available – such as education, buying a house, etc., – it will be more prudent to opt for that loan instead of a personal loan. This is because the cost of borrowing will reduce as the interest rate will be lower.
The bottom line
Availing a personal loan online works best when you have a solid repayment plan in place and have weighed all your options. In times of financial emergency, when you are not eligible for any other type of loan, or when you require a quick turnaround time, an instant personal loan could be a good option.