Dos and Don’ts Before You Apply For A Personal Loan

Instant money empowers you to navigate life's ups and downs with ease, helping you confidently manage both planned and unexpected expenses. A Personal Loan app provides instant funds when you need them the most. Whether you want to renovate your house, go on a foreign trip, or finance your child's higher education, you can use a Personal Loan and repay it in monthly installments. However, you consider several aspects to make the most of these collateral-free loans. This post features a list of dos and don’ts you can follow when applying for a Personal Loan online.

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Personal Loan Dos

●       Assess Your Loan Requirement

Various loan apps provide instant funds with different terms and conditions. Depending on your requirements and financial capacity, you can borrow a small amount or a substantial sum. For instance, with the Hero FinCorp loan app, you can borrow a sum of Rs 50,000 to Rs 5 Lakh online.

However, you must assess your loan requirements and decide whether you need a Personal Loan, and if you do, then how much you require. Before applying, compare and shortlist the available options based on interest rate, EMIs, total loan cost, etc. Also, consider how much amount you can conveniently pay back each month.

●       Compare the Interest Rates

Getting a clear picture of the existing Personal Loan interest rates in the market is important. Check the interest rates of various loan apps and choose an offer. Different loan apps may offer varying interest rates based on your income, employment stability, credit history, debt-to-income (DTI) ratio, and repayment capacity. Your primary goal should be to accept a loan offer with the lowest interest rate. A lower rate of interest decreases your total loan cost and reduces your monthly EMI amount as well.

●       Calculate the Total Loan Cost

Apart from the interest rate, loan apps also demand other charges that make up your loan cost, including processing fees, prepayment charges, late payment penalties, etc. Apps that offer loans at lower interest rates often try to recover their costs through these charges. So, before signing the loan agreement, read the fine print carefully and enquire about these charges to calculate the total loan cost. You can consider a loan app—like Hero FinCorp—with about their applicable charges and terms and conditions.

●       Check Your Loan Eligibility

Lending loan apps have specific eligibility criteria you must fulfil to apply for a Personal Loan. For instance, to seek a loan using the Hero FinCorp Personal Loan app, you must be an Indian citizen between 21 and 58 years of age, earning at least Rs 15,000 per month. You should have work experience of at least six months as a salaried employee or two years as a self-employed professional. Check the app’s eligibility requirements carefully to ensure you can meet them before applying.

●       Prepare the Documents Required

Although loan apps support 100% digital and paperless loan procedures, you must provide a few documents to prove your eligibility—including your identity, address, and income proof. Check the app's documentation requirements and gather them before applying to smoothen and accelerate the loan process.

●       Improve Your Credit Score

Your credit score is a crucial factor in determining your loan eligibility. Although many loan apps do not have a minimum credit score requirement, a decent score is desirable to give you an edge over others. Therefore, check your credit score before applying and improve it to get the loan deal. With that, you can get a bigger loan amount at competitive interest rates and favourable terms and conditions. Be consistent with your repayment habits, reduce your debt obligations, control your credit utilisation ratio (CUR), and diversify your credit portfolio to see the score improving.

●       Reduce Your DTI Ratio

Evaluate your DTI ratio—the ratio of your monthly financial obligations to your gross income. A DTI ratio above 30-40% reduces your credit score and impacts your loan eligibility. A high DTI ratio also makes it difficult to make regular EMI repayments. When you take a Personal Loan, you will need enough disposable money to pay its EMIs on time. Thus, check and reduce this ratio to ensure regular repayments after receiving the loan.

Personal Loan Don’ts

●       Don’t Borrow All That You Can

Lending apps offer loan amounts based on your eligibility and repayment capacity. They may offer a substantial sum if you have a decent income, a stable job, and a high credit score. However, you must borrow only what you need depending on your requirements. Overborrowing will increase your loan cost and make EMIs heftier. Assess your loan requirements and borrow an adequate amount to cover your needs.

●       Don't Decide Based on the Interest Rate

Interest rate is a crucial factor impacting your borrowing decision. You must aim to take a Personal Loan at the lowest interest rate possible. However, it is not the sole factor based on which you should submit the application form. Comparing the loan plans is essential based on several other parameters, such as the loan amount, eligibility requirements, repayment terms, customer service, additional charges, etc.

●       Don’t Submit Multiple Loan Applications Simultaneously

Applying for multiple loans within a short period negatively impacts your credit score, raising red flags for loan companies, causing unnecessary financial strain, and hurting your credit score. Additionally, multiple loan applications are difficult to track. Therefore, compare the loan terms carefully and proceed with an application you genuinely want to pursue.

●       Don't Default on Payments

Defaulting on loan repayments hurts your credit history and makes future loans difficult to obtain. Before borrowing a Personal Loan, create a practical repayment plan according to your income and expenditures. Ensure you have sufficient funds to cover your EMI payments each month without causing financial stress.

●       Don’t Borrow from Unrecognised Lenders

Sometimes, people act quickly during urgent situations, borrowing from unrecognised lenders. This leads to far-reaching consequences. Always borrow money from a loan app and avoid falling for deals that sound too good to be true.

Conclusion

Responsible borrowing and careful planning are. Following these dos and don'ts can help you navigate the loan process effectively. The Hero FinCorp Personal Loan app ensures long-term

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