Are you taking a personal loan? You can get trapped! Here are top tips to fully enjoy this festive season
The festive season is heading towards Dushehra and Diwali and even the wedding season is around the corner, and it is expected there will be massive demand in banks for loans.
Personal loans work like any other loan, but they offer more flexibility and are easily available. But they can trap you in just minutes too! Loans are made available on the basis of the credit history of the customer. These are unsecured loans, not backed by collateral such as homes, jewellery or cars. Taking a personal loan involves a lot of paperwork and can be availed only after it gets sanctioned. The festive season along with wedding season is just around the corner, and it is expected there will be massive demand in banks for loans. Notably, the lenders themselves have geared up and are looking to lure customers in various ways.
Generally, festivals are taken as positive moments to do big thing in life. These can be anything, like purchasing houses, going for vacation, or buying vehicles.
Even jewelries are in massive demand. However, not everyone has the funds to satisfy their financial needs. But guess what! It now looks like banks have heard your pleas now.
Aditya Kumar, Founder & CEO Qbera.com said,"The festival bells are ringing! If you are planning on taking out a personal loan, several lenders have exciting offers lined up for you! Taking a personal loan isn’t a bad idea after all – with flexible repayment tenures stretching up to 5 years and affordable interest rates, it is definitely worth it -with a personal loan, you can spark the enthusiasm by adding an exciting flavour to this festive season – maybe purchase some high-tech gadgets, plan a vacation, or spend on anything you may deem fit."
But there are things that you should be aware of to make the most this festive season, as per Qbera.com.
All attention on interest rate
Getting a personal loan these days is as simple as ordering a pizza online, unless of course, ordering a pizza is a hassle – well, we’d agree that there can be a tad bit of a hassle if you don’t know what pizza to get. If we are to go by that logic, taking a personal loan is way easier per se.
Lenders offer different rates on their personal loans. One important tip to keep in mind this festive season is to watch out for the interest rate.
Choose a lender that is offering the best rate – you’d certainly want the best rate, wouldn’t you? In light of the festive season, many lenders would’ve adjusted their rates to attract more customers – so keep an eye out for this and maybe choose a lender offering the best rate out there!
Giftcards, vouchers and more!
You’ll definitely find a good number of lenders offering gift cards or vouchers on their personal loans.
So, if you want to spice it up this this festive season, pick a lender who has an attractive offer tied to their loan. Most common vouchers include those that can be used in e-commerce sites, food delivery outlets, and retail outlets among others.
Don’t borrow more than you need
A common mistake that people make while opting for a personal loan is that they end up borrowing more than they actually need. Based on an individual’s credit profile, lenders may sometimes provide the option to borrow more than the originally requested loan amount.
If you find yourself in a situation akin to this, try and avoid it - the plain reason being that borrowing more than you need is only going to see you pay more interest and choose a longer tenure (which further inflates your interest). Note that although longer tenures attract lesser monthly repayment amounts, the interest paid is more over time.
Make sure your monthly debt-to-income ratio is favourable
While going for a loan, this is an aspect you must never ignore. If you have multiple loans/credit card accounts, try and limit your monthly debt to income ratio to under 35%. In case of credit cards, avoid pushing your Credit Utilization Ratio over the 40% mark, as over-usage of credit can have an unfavourable impact on your credit score.
More so, lenders look at an individual’s CUR and monthly debt to income ratio closely before approving him/her, and reject applicants with high CURs more often than not. Moreover, any event of rejection negatively impacts your credit score, jeopardising approval chances on future loans or credit products.
Check your loan eligibility before applying
Different lenders have different eligibility parameters that applicants are required to meet in order to qualify for a personal loan. A good thing to do is to look at lenders’ eligibility parameters to accurately determine if you fit into an appropriate eligibility bracket.
If your credit score isn’t all that impressive, you can approach a Fintech lender in order to avoid being rejected by a private bank (remember, rejections affect your credit score quite significantly). Also, your CIBIL score forms the basis for lending institutions to determine the interest rate you’re offered – this technically implies that a sub-prime credit score if often tied to a higher rate of interest.
Checking your eligibility will help you be better prepared, and plan your approach appropriately.