Personal Loans are a great way to get instant funds. They can be for wedding planning, an unexpected medical bill, paying off debt, or a big buy. These unsecured loans, available to both salaried and self-employed, can be availed instantly online without collateral. However, before applying, you should be aware of these smart funding solutions. You should also have repayment plan in place to make the most of these Personal Loans without stressing your finances.
This comprehensive guide will help you understand about this smart borrowing solution and provide effective repayment strategies to pay back the loan on time.
Getting to Know Personal Loans
Lending institutions provide instant Personal Loans without physical documents online. Also, these loans are unsecured so they do not require any collateral.
Lenders check the applicant’s credit history, make sure they have a steady income, and determine if they can pay back the loan.
Tenure and Amount Details
An instant Personal Loan is available starting from Rs 50,000. You can borrow up to Rs 5 Lakh. The repayment tenure is flexible, from 6 to 60 months.
The loan amount and repayment tenure are dependent on the borrower’s credit score, income, and the lender’s policies.
Other crucial factors that matter when taking a Personal Loan include (but aren’t limited to):
- Interest Rates
When seeking finance for personal loan, the interest rate decides the cost of the loan. It depends on the borrower’s credit score and several other factors. Presently, Personal Loan interest rates are up to 21% per annum.
- Eligibility Criteria
Lenders look at an applicant’s credit history, consistent income, age (usually between 21 and 58 years), and occupation (salaried or self-employed). It’s essential to meet these requirements if you like to borrow an instant loan.
- Processing Fees and Disbursement
The loan processing fee ranges from 2.5% to 3.5% of the loan amount. When it comes to disbursement, new-age NBFCs like Hero FinCorp can disburse the loan within 48 hours.
How to Repay Your Personal Loan?
Here are some ways that can help you repay your Personal Loan easily.
- Make use of savings
Paying off a Personal Loan with savings is simple. Before applying for a loan, consider how you can use your earnings to repay the loan. This money management strategy relaxes you and speeds up your loan repayment.
- Look into emergency funds
Many people save money for emergency situations, such as diseases and accidents. If you decide to repay your Personal Loan via your emergency fund, make sure your emergency reserves can cover the repayment fully, or at least the maximum part of it.
Also, don’t deplete your emergency funds mindlessly to finance your Personal Loan. Pay it out strategically, keeping in mind your monthly expenses and balancing the income-expenditure ratio.
- Prefer prepayments
How you want to repay your Personal Loan depends on your monthly expenses. For example, you can pay back the original amount over several months, up to 60.
That being said, many people pay off their Personal Loans before tenure completion, provided they have enough cash flow and can bear the prepayment charges. However, the ideal way to pay off the Personal Loan is over the sanctioned tenure. Doing so won’t impact your daily and monthly expenses.
- Check freelance jobs
You can pay off your Personal Loan by making extra earning in addition to your main income by getting some freelance work. Depending on your expertise, you can work as a graphic designer, tutor, writer, or consultant on a part-time basis. All you need to get started is to create an account on popular freelance platforms and get assignments. Make sure to have a good portfolio to increase your hiring chances on such platforms.
If you know various digital marketing concepts, like how to grow followers on social media, you can serve as a social media expert for small firms as an individual contractor. These side jobs can help you generate income to pay off your Personal Loan faster and save money and interest over time.
- Take out a loan against investments
Consider cashing out stocks, mutual funds, FDs, or other assets if you have big investment funds. Borrowing against investments will help you get cash quickly and pay off your loan. That said, read the terms and conditions carefully before signing. Ensure you don’t cash out enough to impact your overall returns in the long run. Doing calculations and taking your time always helps in this case.
Conclusion
Consider your net worth, valuables, and financial aspirations before applying for a Personal Loan. Those who wish to streamline their finances for a Personal Loan and repay on or before time can use their savings, find side employment or follow other suggestions in this blog.