4 Questions to Ask Yourself before Signing For a Personal Loan
Applying for a personal loan could be a tedious task for many. But, there come situations when you have to pay for a mortgage or get an education loan; there are situations when there’s a dire requirement of money in front of you. It’s obvious that getting a loan would mean cutting down on your expenses and figuring out a new budget. That’s why it’s really important to be certain that you do want to apply for a personal loan.
It’s quite normal to be intrigued by the idea of applying for a new, personal loan. Here’s a list of four very important questions that one must ask before applying for a personal loan.
Am I eligible to get a personal loan?
When applying for a personal loan, you should always make sure to check your credit score. There are various agencies in India that maintain credit history. Most commonly used agencies are Equifax and Transunion. Credit score or CIBIL are generally use synonymously by us. Anything above 600 makes you eligible to avail the loan amount.
If your credit score is low, you might want to hold on for a while and get it right before applying for a personal loan. The only way to do this is by ensuring that you’re meeting your financial obligations on time. Your overall payment history and credit utilization (credit card and other bills) should be paid on time.
Is the lender putting a soft enquiry or hard enquiry?
This is a tricky yet important aspect of a loan application. Soft enquiries are basically those routine questions that are visible to you. Other lenders wouldn’t notice it and your credit score will remain unaffected. On the other hand, a hard enquiry will be visible to everyone that will surely affect your credit score in near future. Lenders generally pull a soft enquiry in the initial phase, while some among these lenders might even pull a hard enquiry. Make sure that you identify a lender who pulls a soft enquiry so that your credit score is not affected in case your loan doesn’t get approved.
How much do you really need?
Whenever applying for a personal loan, people tend to get a bit aspirational, while hoping that they might utilize the amount for more than one purpose. One thing they need to understand that it’s them who will still have to pay this amount off at the end. The more you’d ask for, the more you’d have to pay back along with the interest. You should understand that your future, especially your financial condition is uncertain; it’s advisable to either apply for the exact amount or lesser.
Can you afford your monthly payment?
The final and decisive factor is to determine whether you can afford your monthly payments after taking out the loan. Calculate your basic expenditures per month, while adding the probable loan amount. If this sums up to 36.0% or less of your gross monthly income, then you could think of taking up the loan.