People take personal loans for multiple reasons. While personal loans may not always be planned, it helps that the application process is simple, the amount is disbursed quickly, and there’s no need to be concerned with providing any collateral to get such a loan. Now, with every loan comes its corresponding EMI. It’s only natural that when we take a personal loan, we are expected to return the amount within a stipulated time period. Depending on the amount of the EMI due, one may have to ensure that these are paid on time, and they have enough money during the month for other necessary expenses. Choose a loan amount that best suits your requirements When you’re aware of your financial situation, different financial commitments, you will know how large a loan you actually require. Since personal loan EMIs are dependent on the amount you borrow, you will need to ensure that this is something you will be able to repay without causing a further strain on your resources. Pay your loan EMIs on time There is nothing more important than repaying your EMIs within the stipulated time period. Not only will missing payments put a bigger burden on your financial situation, but it may also adversely affect your credit score. This will in turn damage your future loan and credit card prospects. Rework the loan tenure When you take a loan, you can decide what tenure works for us best. If the loan tenure is long, then while the EMI may well be of a lower amount, you may end up paying more money as interest. This may not be the case when you take shorter duration loans. Therefore, think carefully about your current financial situation, take a look at your monthly budget, and then decide the tenure that will fit these requirements. Look before you leap It’s one thing to immediately want to meet your financial requirements. It’s quite another to not be completely aware of the nitty-gritty of such transactions. Always be aware that you’re dealing with borrowed money and this is a legal agreement you’ve entered into. Therefore, be fully aware of the document you’re signing. Are there any hidden charges? Will you end up paying a higher EMI than what you were told? Always read the entire agreement properly so as not to be surprised later. Consolidate your loans It’s possible that depending on your current financial situation, you end up taking multiple personal loans, which have their own repayment tenures and EMI amounts. Try not to get stuck into a debt trap to meet your different requirements. Opt for consolidating your separate loans into one – not only will this be easier to track, you would be able to manage your debt in a better fashion.
One of the key factors of healthy financial habits is to keep track of your debts and to repay them in full and on time. Doing this impacts your credit score and determines whether lenders will perceive you as a reliable borrower, and find you eligible for greater loans for different purposes, and for issuing credit cards. However, even after being cautious with how we spend and save, there may be occasions, such as a medical emergency or other pressing financial circumstance, when we’re compelled to either max out our credit card, or we take on additional loans, and from multiple lenders. And in case we’re unable to repay our debts in full, our credit score is likely to get dented. Debt Consolidation is the Solution While owing debt to multiple lenders is not really a recommended nor easy situation, one solution for this is to consolidate all your debts. Essentially, this would mean that you take one loan to repay all of the debts that you owe, and then focus on repaying this one loan. 4 Smart Ways to Consolidate Debt Repay your consolidation loan on time: The idea behind taking a debt consolidation loan should not be to default on that too. Such a loan will help you be back on the track to financial stability. Cut down any unnecessary expenses, begin to save more, try to go up from paying the bare minimum due each month to the full amount due each month. This way, your interest won’t rise, and it will be easier for you to clear out your debts. Dip into your emergency savings: Your emergency fund can be put to prudent use when you’re stuck in a financial rut. Whether Public Provident Fund, National Savings Certificate, bonds and securities – either of these could help you in your debt consolidation plan without seriously impacting your credit score. Don’t close old accounts: Just because you took a debt consolidation loan does not mean that once you’ve cleared your debt, you need to close off your earlier accounts or your credit card account. This can adversely impact your credit score because you had worked towards building credit with your earlier account. Closing that would mean you’ll have to start over, and that’s not always an easy place to be in. Reframe your entire budget: A financial introspection may be effective in such cases, where you redraw your expenses and create a budget that’s practical and will help you see through your time of debt.
Personal loans aren’t always planned. Unlike a vehicle, education or home loan, personal loans don’t usually feature in an individual’s plans. However, when the time arrives for someone to take a personal loan, usual factors determine their eligibility. Therefore, it helps to have a stable and healthy financial history, so such personal loan applications aren’t rejected. Common Reasons for Personal Loan Rejection Low credit score Every financial advisor will tell you that having a good credit score is paramount to securing funds or a credit card. If your credit report doesn’t reflect your creditworthiness, then a personal loan application may get rejected. A good credit score is anything above 750. Therefore, if your credit score is much lower, say in the 400-600 range, a rejection is quite possible. To counter this, it would help to work towards building your credit score and taking it above 700. Curb your expenses and save more. Repay any debts you might have on time and pay them in full instead of the minimum due. Inconsistent income If you’re an individual who tends to keep shifting jobs or are self-employed, there may be a possibility that your personal loan gets rejected. This is because lenders prefer someone who is stable with their job and can prove that they have a credible source of income, even if this income is passive. Lenders need to know that they will get back the amount they’ve loaned. To counter this, try to stick to one job for a few years and maintain a consistent employment record; if you’re an independent writer, editor, or any other self-employed person, try to see that you’ve been independent for a few years and have the ability to repay debts. Incomplete or incorrect information in loan application or credit report There must be a consistency in the information you submit on the loan application form as well as your credit report. For instance, any change in your name or address must be reflected in your forms. Even mistakes in your PAN card details can lead to your personal loan application getting rejected. To counter this, do a due diligence of all the documents that you submit. Update any change in name or address immediately, and then apply for a loan. Current loan portfolio If you’ve taken a few loans already, lenders would like to see whether you’ve been clearing your dues consistently. Don’t bite off more than you can chew. The existence of multiple existing loans may tell a lender that you might be in a financially tight position, and thus, unable to repay the personal loan. To counter this, keep your monthly EMIs as low as possible and close off as many loans as you can. Another option could be to consider a debt consolidation loan, which will combine all your existing loans into one single loan, thereby making it simpler to track your payments and even get a lower rate of interest.
As we’ve often maintained, personal loans aren’t always planned, and it helps to have a healthy financial record so that your personal loan application is not rejected. One of the many benefits of a personal loan is that the application process is quick and easy, the amount is disbursed in a swift manner, and you don’t have to worry about providing any collateral to get the loan. At the same time, the absence of collateral can lead to higher rates of interest. Despite the ease of a personal loan application, it is money that you’re borrowing and one that you need to return within a certain period. Therefore, you’ll have to keep certain factors in mind when deciding the personal loan tenure. Measure your monthly budget Borrow only what you know you’ll be able to afford and eventually return. It’s possible that you own a credit card and another loan, possibly a home loan or a vehicle loan. Therefore, you’re anyway going to have some loan EMIs to pay off. Choose a personal loan tenure that won’t dent any of your existing EMI plans. Ensure that your personal loan tenure doesn’t adversely affect your financial situation or dent your emergency fund. Personal Loan tenure and amount Choose a loan tenure and amount that you can afford. Based on the amount you borrow and the time period you choose to return it, you’ll come to the EMI you’re supposed to pay. Know that a longer tenure may mean a smaller EMI, but it could also mean a higher interest rate. Therefore, be very careful of how much exactly you will have to shell out eventually. In addition, when going through the terms and conditions of such a financial transaction, find out if there are there any foreclosure charges, and how expensive that can get, how will foreclosing your loan impact your credit score, and how financially prudent is it really to foreclose your loan at the time you choose to. Some lenders also offer customised personal loans where users pay only for the amount that they actually use – find out about such lenders and choose your tenure and amount accordingly. Healthy credit score This three-digit number ranging from 300 to 900 is a determining factor for whether you can even qualify for a personal loan, and once you do, how much interest you will end up paying. As always, a higher credit score, upwards of 750 deems you reliable and may encourage a lender to lend you money at a reasonable rate of interest. Therefore, keep checking your credit report and note any negative change in your score to take immediate corrective action. Reasonable rate of interest If you’ve been a practitioner of healthy financial habits, chances are you have a good credit score and are in good books of lenders. If you have a good repayment history, lenders will look at you as a reliable borrower. When going for a personal loan tenure, be aware of the rate of interest on your loan – it shouldn’t end up exceeding the original loan amount. Longer loan tenures aren’t necessarily conducive for you may end up paying higher interest. Shorter tenures will mean your EMI will be slightly steeper, but the rate of interest may well be within reasonable range. Thorough due diligence Again, because it’s borrowed money that you will eventually repay with interest, it is absolutely necessary to see that the lender is an RBI-approved and regulated entity. Try not going for the first lender you come across, despite the ease of approval and repayment. Do basic market research, because it’s not the best idea to have to not get any loan amount when you need it the most because the lender was bogus, or end up getting caught in a debt trap. When one is in severe need of money, it’s easy to forget to keep track of one’s budget. As a result, there can be situations where people take loans to repay their existing loans. Do not fall into such a debt trap, which is likely to negatively impact your financial situation.
StashFin provides a credit limit of up to Rs. 5,00,000. The loan amount can be repaid in flexible EMI tenures ranging from 3 to 36 months.
A personal loan is a type of unsecured loan that requires no collateral. It can be used to cover various financial expenses like education, travel, etc.
The no-collateral feature of a personal loan makes it one of the most sought-after forms of a loan; because it can be used to meet any immediate financial needs.
You can avail the short-term loan amount at affordable interest rates starting from 11.99%, which can be repaid in flexible EMI tenures starting from 3 months.
Be it spending on a Christmas tree or going out for a vacation, you can do it all with the StashFin personal loan.
Mr. Vikram had applied for a personal loan to purchase trekking equipment and cycling accessories for his next Himalayan trekking expedition