Applying for a Small Personal Loan? Keep These 6 Things in Mind!
A small personal loan appears to be a quick and straightforward solution for minor financial crises. Therefore you may easily get tempted to apply for a small loan online or offline when you need money.
But do you stop for a second and think about the repayment plan? Do you know if you don’t fit the criteria and your loan gets rejected, your credit score gets affected? This happens if you are rejected even for a small loan.
6 Things to Check Before Applying for a Loan
Check out these 6 things you must keep in mind when you apply for a small or bigger loan so that it gets approved without any hurdle and you can repay it easily.
- Are the EMIs Affordable?
The criteria of affordability differ for each individual. What is affordable for a person with the same income may not be affordable for you. Your cash flow, total family income, and expenses decide how much EMI you can pay.
Do your math! Don’t go for a bigger loan if you can’t afford to repay it. Apply for a small loan which you can repay without disturbing your monthly budget. Also, explore the options of saving money for EMIs by cutting your unnecessary expenses.
- Are You Getting the Best Interest Rate?
Apart from credit score, the loan interest rate also depends upon your employer, repayment capacity, age, etc. Generally, the interest rate for a small loan starts from 10% approximately. But there’s a lot of competition in the credit sector to give a personal loan to a person with a good credit score. So you can get a good deal!
Your options got wider with online lending platforms providing quick small loans online. If your credit score is good, explore all the options available before applying for the loan.
- Are You Eligible?
Take a look at your financial activities to predict your chances of getting a loan. The common mistake is to leave it to the lender entirely to approve or reject your profile. Their rejection will put a black spot on your credit report.
Therefore take a look at your credit score yourself and repair it if there are any damages due to defaults in payment. Also, check other lender requirements, such as age and monthly income. Apply only after ensuring that you meet all the eligibility criteria.
- Which is a Good Tenure for You?
The tenures for small loans are generally shorter. And it is better to get a short term. This way, you would need to pay less interest. But don’t make tenure so short that it becomes difficult for you to repay the loan. Opt for an affordable tenure and free you from liability as soon as possible.
- What are the Documents You Need?
Thankfully, when you apply for a small loan online, you generally don’t need to submit too many documents. However, some essential documents are mandatory to get the loan from anywhere. Those are ID proof, address proof, and income proof. Your voter ID card, driving license, etc., are considered your ID proof.
You can submit utility bills and ration card as address proof. A passport and aadhar card work as both ID and address proof. The bank account statement, form 16, and salary slip is significant income proofs. Make sure you have all the mandatory documents with you.
- Why Do You Need a Loan?
It’s a vital question to ask yourself! That’s great if you tick all the above boxes; you are eligible, have all the documents, and can repay the loan! But why do you need a loan! A small personal loan is justified if taken for a necessary expense.
But taking a loan to invest in some financial scheme related to market risk can be disastrous, to give an example. You can lose funds and be left with an extra burden of EMI in such a case. So ask yourself before applying for that small loan online that are you applying for a legitimate reason or not?
Once you apply for the loan, it’s up to the lender to approve or reject your loan. And you don’t want to waste your time and energy getting rejected when you need funds.
Moreover, with each rejection, your credit score gets disrupted, which is not at all good for your prospects of getting a loan. Also, if you don’t check that you can afford the EMI with interest or not in the given tenure, you may default on the repayment.
Therefore check these 6 things thoroughly before filling up your details in the loan application form.
Applying for a Small Personal Loan? Keep These 6 Things in Mind
Author Bio: Tanvi Kaushik specializes in Content Marketing and works with the Digital Team at KreditBee – India’s fastest personal loan platform where self-employed and salaried professionals can easily avail of personal loans in just a few minutes when in need of quick funds. Tanvi writes to-the-point articles on personal finance and budgeting which are truly appreciated by her readers. She is committed to making money matters easy to understand even for the layman. Her commitment to her work doesn’t stop her from pursuing her hobbies of hiking, trekking and going on adventurous trips.