How to Take Out a Loan: Frequently Asked Questions Answered
Jul 25,2019 Borrowing, Loan, Personal Loan, Online Borrowing
Need to fill gaps in your budget this month or pay for a marriage expense? Understanding how to take out a personal loan is the first step to securing the funds you need to cover temporary, short-term expenses.
Before applying for a loan or resorting to other short-term lending options, check out our answers to the most frequently asked questions about taking out a personal loan.
1. Is it a good idea to take out a personal loan?
Depending on who you are and who you ask, the answer will vary. Personal loans are unsecured, which means they don't require collateral from the borrower. Because of this, the interest rates on personal loans are typically higher than what you'd see on a home or auto loan.
Even so, taking out a loan may still be a good option, especially if you meet the following criteria:
The same principle applies to credit card debt. A personal loan can be used to consolidate multiple outstanding credit card balances into one monthly payment. The interest rates on a personal loan could be lower than the interest rates on your credit cards, especially if they are close to being maxed out.
Say, you're getting married. Rather than charging the wedding costs to a high interest rate credit card, you can take out a lower rate personal loan to cover the expenses. This option will not only give you the time you may need to pay the money back, but there's a very good chance you will save on interest charges.
While not a guarantee, a personal loan may help improve your credit score - especially if your current credit report shows credit card debt as your main type of credit. A loan can help diversify your "account mix" and may lower your credit utilization ratio.
2. How do I get a small personal loan?
When your budget is tight or your credit card bill is higher than usual, a small personal loan may help cover a temporary spike in your monthly expenses. Typically defined as Rs. 2 Lakhs or less, a small personal loan can be a great way to borrow exactly what you need without taking on a surplus of additional debt.
Because they are less profitable than home and auto loans, many major banks won't offer small personal loans. However, plenty of reputable online lending marketplaces offer access to lenders that do offer such loans. For example, qualified borrowers can obtain a personal loan through OMLP2P for as low as Rs. 25,000 (and all the way up to Rs. 10,00,000).
Regardless of your lender, it's important not to take on more debt than is absolutely necessary to cover the expense.
3. How do I get qualified for a personal loan?
Applying for a personal loan can sometimes be a very confusing process. The reason for this is that personal loans have many aspects that need to be accounted for. Keeping a track of these aspects can often be overwhelming for you. However, you need not worry about applying for personal loans as they are very easy to understand once you know what to focus on.
Here are some things you should do to get swift personal loan approval;
- Check eligibility requirements
- Decide on the loan amount
- Use the EMI calculator to decide the best EMI, tenure of loan and interest rate
- Check your expenditure against the EMIs to ensure that you are not overstretching yourself financially
- Apply for the personal loan online
- Get listed on platform for personal loan funding
- Money is disbursed to your account
- Say goodbye to financial trouble