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Personal loans are best suited for addressing financial emergencies especially when you quickly need funds, and you know that you can repay the amount you are borrowing at a later stage when your finances improved. It is also essential to understand the specific purpose of the loan, whether it’s for a medical emergency, home renovation, or another reason.
Knowing your purpose will help you decide the loan amount. Borrowing without purpose means that you have no repayment plans, and you are unaware of the interest liabilities.
When you apply for a personal loan, lenders have specific eligibility criteria, including age, income, employment status, and credit score. You must ensure you meet these eligibility criteria before applying to avoid rejection. Here are the key things you must keep in mind.
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Your credit score can help you secure a loan with favourable terms. Improve your credit score and if your credit score is already good, then you have the opportunity to negotiate better terms of the loan.
Compare personal loan offers from various banks, financial institutions, and online lenders. Consider factors like interest rates, processing fees, loan tenure, and customer service.
The interest rate is a critical factor. Choose a lender offering the lowest interest rate, as it will significantly impact the total cost of the loan. Keep in mind that personal loan interest rates can be fixed or floating. A fixed rate remains constant throughout the loan tenure, while a floating rate can change with market fluctuations.
Decide on the loan tenure based on your repayment capacity. Longer tenures result in smaller EMIs but may lead to higher overall interest
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