When applying for a personal loan, interest rates begin at 11%. The interest rate on your loan will be determined by several factors, including the loan amount you request, your credit history, and the time you take to pay it back. Keeping a solid standing with the lending institution and a high credit score will help you negotiate a cheaper rate on your loan.
Reasons to Get a Personal Loan
When should one consider applying for a personal loan? There are minimal restrictions on how a personal loan may be used because it is an unsecured loan that does not need collateral. It has many potential applications, including debt consolidation (whether from other loans or credit cards), making large purchases when you don’t have cash and emergency scenarios. Neither trading stocks nor speculation is permitted with this.
Personal loans are frequently used to cover unexpected costs in areas such as business or higher education, finance a trip, stock up on luxury electronics and home appliances, cover the cost of a wedding or other special event, pay for unexpected medical bills or home repairs, and so on. It can also be put toward acquiring a car if the personal loan’s interest rate is more attractive than the auto loan. Therefore, personal loans may be useful for various purposes, including covering anticipated and unexpected costs.
Things to do After Closing a Personal Loan
If you have recently repaid or had your personal loan foreclosed on, you might believe that your legal responsibility for the debt has ended. But alas, that is not the situation. You should do a few things when you pay off your personal loan.
No Dues Certificate (NDC)
After the debt is paid in full, the lending institution issues a “No Dues Certificate” (NDC). You should get this as soon as possible after paying off your debt, as it is a crucial piece of paperwork. That so, keeping this record for a long time is also a good idea. You may rest certain that your reimbursement is legitimate thanks to this certificate. You can’t show debt satisfaction without this paper.
This document serves as proof that your prior loan has been repaid if you want to apply for a personal loan shortly. If you are paying off your loan in full with cash, your lender will likely issue this paperwork immediately. The NDC will be issued by the lender and delivered to your registered address or made available for pickup at the lender’s branch office if you are making a payment by cheque, NEFT, or another method.
Statement of Account (SoA)
The SoA and NDC provide evidence that all of your bills have been paid in full and on time. Certain lenders supply this paper as a courtesy, but it is not required. This document may be useful and should be obtained if made available by your lender. But you should also check the credit report for any irregularities. Fixing problems can be done through the SoA.
Collection of unused cheques:
It’s also a good idea to round up any unused cheque leaves after you. Closing a loan concludes with collecting the No Dues Certificate and any unused checks left.
After the loan closes, you should check your credit.
This is only a suggestion. After the closure procedure is completed, verifying the credit score is optional. The score should be identical, but you should double-check, just in case. The best time to check your credit is immediately after the loan is paid off, but you should do it at the latest within two years.
Interest Rates on Personal Loans and How They Are Affected
Interest rates are determined by lenders largely based on their cost of funds and the credit risk assessment of loan applicants. Factors like your credit history and the economy’s health can significantly impact the interest rate you pay on a personal loan.
Evaluation of Financial Capability
Loan interest rates are often determined partly by a borrower’s credit history, as reported by a growing number of lenders. Personal loans with reduced interest rates are available to those with higher credit ratings. Keeping a credit score of 750 or above is thus recommended. Maintaining a good credit score requires responsible financial behaviour, such as paying off debt on time and not applying for new credit or loans frequently.
It’s important to remember that inaccuracies can impact credit scores in a report. Applicants should monitor their credit reports regularly to correct any discrepancies before they hurt their credit scores.
Higher earnings mean a more secure ability to repay the debt. The lender’s exposure to credit risk decreases as a result. Therefore, many personal loan providers provide preferential interest rates to higher-income customers.
When determining the interest rate for a personal loan, many banks and credit unions look at the applicant’s job history. Generally, interest rates for salaried workers are lower than those for self-employed individuals because of the greater predictability of a salary. Lower credit rates are typically provided to candidates with government or PSU jobs because of the greater job stability and income predictability they enjoy. Personal loan applicants who work for multinational corporations or other well-regarded private sector firms also tend to fare better during economic downturns.
A pre-existing banking or loan connection with the creditor:
Existing banking or lending customers sometimes qualify for preferential interest rates on personal loans from a variety of lenders. Therefore, individuals seeking personal loans should first explore options from financial institutions (banks or NBFCs) with which they already have a pre-existing connection.
The Personal Loan from Piramal Finance is the easiest method to receive a loan for your use. It deviates from the standard practice of lending. A personal line of credit allows you to access your loan whenever and wherever you need it. The best part is that you only pay interest on the money you spend.