A Complete Guide For Personal Loan Tips [2023]

Personal loans are unsecured loans, which means that you don’t have to provide any collateral to avail them. It provides you with the flexibility to use the funds for various purposes, such as home renovation or purchasing a new car. However, selecting the right personal loan is essential, and it requires you to consider various factors in Malaysia. The articles will give some personal loan tips for you to keep in mind while choosing a personal loan.

Personal loans are a beneficial financial product to consider in case you have some high-interest debt, an urgent need for cash, or wish to fund a personal expense. However, taking a personal loan can also create additional financial pressure if not managed efficiently. As such, you need to consider several factors before availing a personal loan. Here are some things to look for:

A Complete Guide For Personal Loan Tips

Calculate monthly installments (EMIs)

Before applying for a bank personal loan, it is crucial to calculate the estimated monthly installments (EMIs) you will have to pay. EMIs are the fixed amount you have to repay every month until the loan term ends. Ensure that the EMI you will have to pay fits within your budget without putting undue pressure on your finance.

It is also important to note that the EMI amount is directly proportional to the loan amount and inversely proportional to the loan tenure. This means that a higher loan amount or longer loan tenure will result in a higher EMI, and vice versa. Therefore, it is essential to strike a balance between the loan amount, loan tenure, and EMI amount to ensure that you can repay the loan comfortably.

Research Thoroughly Before Applying

Thorough research is a crucial part of choosing the right personal loan. Research different lenders, the personal loan interest rates they offer, and their loan terms and conditions. Also, check the feedback and loan review from previous borrowers online to know the lender’s reputation. Compare the different products and choose the one that meets your needs and budget.

Moreover, you should also consider the lender’s personal loan customer care service quality, ease of application and personal loan status approval process, and the loan disbursal time. A lender with a streamlined and hassle-free loan process can make the loan availing experience smoother and more convenient for you.

Look for Lowest Interest Rate

The interest rate is a crucial factor that determines your loan’s cost. Compare the loan interest rates offered by different lenders and choose the one that offers the lowest rate. A low-interest rate can help you save a considerable amount of money in the long run without compromising on the loan amount.

However, it is important to note that the loan interest rate offered to you may depend on various factors such as your credit score, income, and repayment capacity. Therefore, it is advisable to improve your credit score and maintain a positive repayment history to increase your chances of getting a lower interest rate.

Check Eligibility Criteria

Every lender has specific personal loan eligibility criteria that a borrower needs to fulfill to be eligible for the personal loan. Check these criteria before submitting the loan application. It includes:

  • Age
  • Income level
  • Employment status
  • Credit score

Ensure that you meet the eligibility criteria to avoid the loan rejection and improve your chances of approval.

Moreover, you should also check the loan amount and loan tenure offered by the lender based on your eligibility criteria. Some lenders may offer a higher loan amount or longer loan tenure to borrowers with a higher income or better credit score. Therefore, it is essential to choose a lender that offers a loan amount and tenure that suits your needs and repayment capacity.

Maintain a healthy credit score

A healthy credit score indicates that you are a responsible borrower and can repay the loan on time. Check your credit score before applying for a personal loan, and try to improve it if necessary. A higher credit score can help you get a lower personal loan interest rate and better loan terms and conditions while bad credit gives the opposite.

You can improve your credit score by paying your bills and loan EMIs on time, maintaining a low credit utilization ratio, and avoiding multiple loan applications within a short period. A good credit score can also help you negotiate better loan terms and conditions with the lender.

Be Careful of Additional Charges

Every lender charges various additional fees, such as processing fees, prepayment fees, or late payment fees. Read the loan terms and conditions carefully and check for the additional charges. Ensure that the additional fees do not increase the loan cost excessively.

You should also check if the lender offers any additional benefits such as 

  1. Pre-approval offers
  2. Flexible repayment options
  3. Top-up loans

These benefits can help you save money and make the loan repayment process more convenient.

Check Prepayment Charges

Some lenders may charge a prepayment penalty if you decide to close the loan before the loan term ends. Check for the prepayment charges and make sure that they are reasonable and not too high.

Moreover, you should also check if the lender allows partial prepayment or full prepayment of the loan amount without any penalty. Prepaying the loan amount can help you save on interest and reduce the loan burden.

Shorten the Loan Tenure

A shorter loan tenure means that you have to pay a higher EMI, but it also means that you will pay a lower amount of interest overall. A longer loan tenure may offer you a lower EMI, but the total interest payable will be higher. Choose the loan tenure that fits your budget and interest expenditure the best.

You should also consider your future income and expenses while choosing the loan tenure. If you expect your income to increase in the future, you can opt for a shorter loan tenure and pay off the loan quick. On the other hand, if you anticipate any financial constraints in the future, you can opt for a longer loan tenure and pay a lower EMI.

A personal loan can be a useful financial tool if managed efficiently. Considering the above mentioned factors, you can choose the right personal loan that suits your needs and repayment capacity.

Conclusion

Choosing the right personal loan can be a daunting task. Nevertheless, you can make the process easier for you by comparing the different lenders, interest rates, and other factors. Keep the personal loan tips mentioned above in mind, and make sure that the loan’s cost fits your budget. A personal loan can be a powerful financial tool if managed right, helping you fulfill your financial obligations with ease.

FAQs

How to make the best out of a personal loan?

The applicant should look for promotions such as rebates or deducted fees to enjoy the reduction of the loan expenditure.

How can I reduce my monthly payment on my personal loan?

The applicant may communicate with the banking institution official to reach an agreement on a reduced payment amount.

Is it better to borrow money or use savings?

It depends on your goal and circumstances. If there is sufficient savings after a big expenditure, there is no need for a personal loan. However, a personal loan could be better if the applicant doesn’t possess a big sum of savings.

How can I avoid paying interest on my personal loan?

There is no avoiding loan interest payment. It is how financial institutions make money out of personal financing.