5 lakh Personal loan or a personal loan of the above amount of up to Rs 40 lakh can be availed for any purpose, may it be for personal or business, i.e. it has no end usage restriction except if used for any speculative purpose. However, note that while you look forward to availing of personal loans from a reliable lender at lower personal loan interest rates with favourable terms & conditions, striking a comparison among different lenders becomes crucial to choose the appropriate one. Alongside this, you should also go through the different criteria defined by various lenders to understand the ideal lender for yourself.
Here, we have mentioned below some important tips/factors you should focus on while opting for a personal loan to avail the best 5 lakh personal loan or higher amount personal loan at affordable personal loan interest rates:
Review your credit score and repayment capacity
You require mandatorily maintaining a great credit score for availing of a 5 lakh personal loan or higher amount personal loan and wondering what is meant by credit score? A credit score is one of the pivotal factors checked by lenders when assessing your personal loan application to judge your creditworthiness. Your credit score is decided by the 4 credit bureaus that receive data from your lenders and issuers to set your score.
The credit report compiled by each bureau is looked upon by lenders to judge your trustworthiness as a borrower. Your credit behaviour history with any past debt endows your lenders with an idea regarding your future behaviour if you borrow.
Alongside your credit history that they understand from your credit report, lenders even assess your repayment capacity. For those with higher disposable income, lower financial liabilities, their chances of availing of personal loan approval is higher as compared to those with lower income and higher financial liabilities. Personal loan lenders factor in a personal loan applicant's repayment capacity when assessing their application for a personal loan. Generally, lenders prefer applicants' EMI involving their personal loan EMI and other existing EMIs to be under 60% of the NMI of Net Monthly Income or GMI or Gross Monthly Income. The ones exceeding this fixed limit have lower chances of availing of personal loan approval.
Thus, for increasing your home loan approval chances, applicants should consider maintaining their loan repayment obligations within 60% of their NMI or GMI. It can be done either by reducing your existing debts by foreclosing them or by choosing a higher repayment tenure.
Also, note that personal loan EMI is set as per personal loan interest rates offered, loan repayment tenure and the availed loan amount. Though lower EMI results in higher repayment tenure and higher interest cost outgo, higher EMI leads to shorter repayment tenure and lower outgo of the interest cost. Thus, personal loan applicants must take the assistance of online personal loan EMI calculators to know their optimum EMI based on their repayment capacity. To get a thorough understanding of their optimum EMI, personal loan applicants must factor in their mandatory monthly expenses, monthly contributions towards their crucial goals, rent, insurance premiums etc. Submitting a personal loan application after knowing about your optimum EMI can reduce your chances of personal loan EMI defaulting due to unplanned aggressive loan repayment schedules.
Compare the personal loan interest rates and offers.
As the personal loan interest rates, processing fees, loan repayment tenures etc., can vary based on the lenders' cost of funds and their credit risk assessment of the personal loan applicant, ensure to compare among as many lenders as possible before selecting the final, personal loan lender. Start your personal loan search by connecting with your banks and NBFCs with whom you already share an existing consumer relation to avail a better deal on personal loans like lower personal loan interest rates, etc. This must be followed up by approaching online financial markets for comparing the personal loan interest rates & other terms & conditions offered by other banks or lenders. Doing this would assist you in getting the best personal loan deal with the lowest personal loan interest rates, optimal loan tenures & adequate loan amounts.
Do not enquire with multiple personal loan lenders within a short period of time.
Every personal loan application that you submit makes the lender or issuer avail your credit report to understand your creditworthiness. These applications that are made directly with the lenders are called hard inquiries; each such enquiry results in a sink in your credit score. Hence, applying directly for a personal loan with various lenders within a short time span can result in a considerable reduction in your score, and thus, the chances of your personal loan eligibility fall. Instead, approach online financial markets to strike comparison among various lenders available on your monthly income, credit score, job profile etc. Though online financial markets would also fetch your credit report to provide numerous personal loan offers, credit report fetches made by such markets are looked upon as soft inquiries, and they do not affect your credit score.
Check the prepayment charges.
Personal loan prepayment, whether in part or full during the loan repayment tenure, can assist in lowering your thorough interest cost. As RBI has disallowed lenders from charging prepayment charges on floating rate loans, personal loans at floating interest rates do not come in with any prepayment charges. However, in the situation of fixed personal loans, prepayment penalties can go up to 5% of the principal outstanding amount. Moreover, lenders might also cap the number and the number of prepayments allowed in the course of overall loan repayment tenure. Thus, personal loans applicants capable of prepaying their personal loan in future must prefer a lender with the least or nil prepayment charges & limitations.
Add in a co-borrower
Those with lower personal loan eligibility due to low credit scores, inadequate income etc., can enhance their personal loan chances by including an earning family member with a good credit profile as co-borrower in their personal loan. Including a co-borrower lowers the lender's credit risk as co-borrowers also become equally responsible for loan repayment both in the absence and presence of a primary loan applicant. As the income of a co-borrower is even factored in when assessing the personal loan applications, looping in a co-applicant can even assist in availing a higher personal loan amount, if required.