Over the past couple of months, Naren has been getting calls from various lenders offering personal loans. He finds it reassuring that he can get a personal loan approved for himself in a couple of days if the need arises. He has been a good borrower, doesn't believe in reckless loans, and maintains a good credit score of 710. Still, he wonders whether he should have used a personal loan to close the growing gap in his monthly budget due to recent pay cuts. Is the current crisis the right time to get a personal loan?
Naren understands that under normal circumstances, obtaining a personal loan makes sense when it is the least expensive form of credit and is used for something that has the potential to increase your financial position, such as debt consolidation or home improvement without straining your budget. On the other hand, a personal loan used for discretionary expenses, such as vacations, can be expensive and unnecessary. Having said that, even in a crisis situation, a personal loan used to pay bills such as rent, utilities, or medical expenses is an expensive option that should only be considered after other options, such as loans from friends and family, crowd-funding, etc.
Naren could easily qualify for a personal loan, given his credit history. In response to the crisis, some lenders have increased credit ratings and income requirements, making it difficult for borrowers to qualify for a loan or obtain a low rate.
It also means that finding a loan is now more important than ever. Non-bank finance companies tend to offer loans with more flexible terms than banks. Naren should check with his bank because you may not only have a better chance of qualifying for a personal loan but also access to low rates and special features. If a friend or family member is willing to participate in signing a personal loan, adding it to the loan application can help Naren obtain an approval or a lower interest rate.
In order to choose the lender, Naren must list down the features that are important to him. He must consider how much it will cost of cost and how soon he needs the funds. He might want to use pre-qualified offers to verify the price and duration you can receive, while others may specialize in quick financing. He must also be sure of the repayment period and terms. After Naren compared offers and selected a loan with the lowest rate and payments that fit his budget, he will be able to formally apply for the loan.
Source: Economics Times
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