Personal loans have become an essential part of financial planning for most salaried professionals. They require no collateral and can be used for a variety of reasons, such as funding a wedding, paying for a medical emergency, consolidating debt, and much more.. However, it is crucial for borrowers to consider several factors when choosing a personal loan to ensure they make an informed decision.
Personal Loans: How Are These Beneficial?
Personal loans can be a major financial tool in many ways:
- Consolidating debt: These loans can be used to consolidate high-interest debt, such as credit card debt, into one manageable monthly payment. This can help people save money on interest charges and pay off their debt faster.
- Covering unexpected expenses: These loans can be used to cover unexpected expenses, such as medical bills or car repairs. This can help people avoid high-interest credit card debt or payday loans.
- Funding big expenses: People can apply for a personal loan to fund big expenses, such as home improvements, a wedding, or a vacation. This can help them make these purchases without having to save up for a long time or make them on a credit card with high interest rates.
- Building credit: It can be a good way for people to build their credit history and improve their credit score. If people make their EMI payments on time, it can show lenders they are responsible borrowers.
What Factors to Consider When Choosing a Personal Loan With a Salary of Rs. 20,000?
When choosing a personal loan with a salary of Rs. 20,000, there are several important factors that you should consider before making a decision. These factors can impact your loan eligibility, interest rates, and loan repayment tenure.
Here are some factors to consider when choosing a personal loan with a salary of Rs. 20,000:
- Loan Amount and Repayment Term
Before applying for a personal loan, it is essential to determine how much you need to borrow. As your salary is Rs. 20,000, your loan eligibility may be limited to a certain amount. Make sure you calculate the loan amount you require and go for one that you can comfortably repay within the tenure of the loan. It is also essential to choose a repayment term that works best for you. Longer repayment terms usually result in lower monthly payments, but they also mean that you will pay more interest over the life of the loan.
- Interest Rates
Interest rates are one of the most critical factors to consider when choosing a personal loan. The interest rate you receive will impact the overall cost of the loan along with the EMIs you will pay. Interest rates are determined based on several factors such as the borrower’s credit score, repayment history, and loan amount. Also, before applying for a loan, please be clear on your personal loan eligibility. This plays a significant role in the whole process and can make or break your loan application.
- Eligibility Requirements
To apply for a personal loan, you must meet certain eligibility criteria. This usually includes an age range, a minimum income requirement, and a good credit score. Meeting these requirements is essential as they can impact your loan approval and interest rates.
- Loan Disbursement Timeframe
The time it takes for a personal loan to be disbursed is another essential factor to consider. If you need the funds urgently, it is best to choose a lender with a prompt disbursement timeframe. Many modern NBFCs offer instant personal loans that are disbursed within 24 hours.
- Credit Score and History
Your credit score and history play a crucial role in the personal loan approval process. A minimum credit score of 630 and above increases your chances of approval and also helps you get a better interest rate. Lenders usually check your credit score before approving your loan application.
Conclusion
Choosing a personal loan requires careful consideration of several factors. It is essential to determine the loan amount and repayment term that works best for you. You must also compare interest rates from different lenders, meet eligibility requirements, and consider loan disbursement timeframe. Your credit score and history also play a crucial role in the loan approval process. By considering all these factors, you can make an informed decision on your next personal loan.
About the Author
Amaira Sharma is finance expert and former business growth strategist who has more than 8+ years experience in the industry, now she helps others to get better financial stability and standards. She loves to write useful tips on personal finance and businesses.