The personal loan market has witnessed a significant growth of 12.6% in April 2021 after going through a massive economic depression last year. This particular credit facility has been a life-saver for salaried employees, primarily because of its multipurpose nature and easy availability of substantial funds. Since a huge portion of their monthly income gets utilized to meet fixed liabilities, salaried individuals inevitably look for additional funds to manage urgent monetary requirements.
Thankfully, with the advent of digital lending facilities, availing of a personal loan for salaried employees has become much easier. However, there are certain aspects one must be aware of in order to make the most of its benefits.
Things to remember before availing of a personal loan for salaried employees
From a medical emergency to home renovation, a personal loan can be used to meet all sorts of financial requirements. While the restriction-free usage feature makes it the most effective financing solution when you do not want to pledge your assets, a borrower must consider certain other important aspects. For instance,
- Choose the loan amount wisely
Repayment capability or your credit profile is a key aspect of personal loan eligibility criteria. Every financial institution will assess your creditworthiness and sanction the loan amount accordingly. However, it is advised that you borrow money as per your need so that it does not impose unnecessary financial burdens on you.
- Compare interest rates
The interest rates generally vary across different lenders, depending on the borrower’s creditworthiness. To make sure that your monthly liabilities do not become unbearable after a point, compare interest rates and calculate your EMIs for each of them before choosing one.
Note that one of the effective ways to get the best personal loan is to improve your credit score. This also helps you to negotiate better interest rates with your preferred lender and eventually makes the loan more affordable.
- Go for a shorter tenor
Although most lenders offer flexible repayment tenor on a personal loan for salaried employees, it is better to choose a shorter tenor to quickly get rid of your financial liabilities. A longer tenor may make your EMIs comparatively affordable; however, it also increases the overall interest outgo in the long run.
For instance, an individual has applied for a personal loan of Rs.10 lakh at a 5% interest rate and chosen a repayment tenor of 5 years. In that case, the EMI amount will be Rs.18,871, and the total interest payable will be Rs.1,32,274. Now, if he/she decides to extend the repayment tenor and go for 10 years instead, the EMI will reduce to Rs.10,607; however, the interest outgo will be Rs.2,72,786.
It is pretty evident that changes in your loan tenor will affect the overall repayment strategy and can make the entire process pretty expensive. So, use the EMI calculator and find the right personal loan tenor that works for you.
- Maintain a good credit history
As mentioned earlier, lenders decide on the loan amount and interest rate based on a borrower’s credit profile. Having a CIBIL score of 750 and above is ideal to get instant approval on unsecured credit facilities. In case it is lower than 750, paying bills on time, keeping old accounts open, etc., are a few things you can do to improve your personal credit score.
- Check pre-approved offers
These days lending institutions are providing pre-approved offers to make availing financing hassle-free and affordable. These offers are available on several financial products, like personal loans, business loans, credit cards, etc. You can easily check your pre-approved offer by submitting your name and contact details.
Apart from pre-sanctioned offers, you should also check all the loan payment methods your preferred lender is offering so that your financial planning does not get hampered. Once you have a clear understanding of these details, know how to apply for this unsecured loan.
Application process of personal loan for salaried employees
Working individuals can follow the below-mentioned steps to apply for a personal loan:
Step 1: Visit the official website of your preferred lender and start by filling out the application form. You will have to enter your personal information, including employment and financial details.
Step 2: Choose the loan amount and repayment tenor after assessing your repayment capacity.
Step 3: Some lenders will ask you to attach the supportive documents over there or send a representative to collect them.
Note that the documentation process is quite stringent in the case of personal loans due to its unsecured nature. Not submitting the right documents can be one of the key reasons for personal loan rejection. In order to avoid that, make sure to check your lender’s website and keep the required documents handy before applying for a personal loan for salaried employees.