Often there are instances when you might need financial assistance to overcome liquidity crunch or address an emergency. Thanks to digitalization, there are a host of options for you to bank on in times of need.
However, before opting for any financial assistance, there are certain things that you need to consider, and this article lists the all-important parameters that you must take into account before doing so.
Identify the options you have at your disposal for seeking financial assistance. You can do so either from friends or family members or traditional lending institutions. You can also contemplate assistance from non-banking finance companies (NBFCs).
Evaluate the pros and cons of each option before making a final choice. It is advisable to go for an option that best meets your requirements and aligns with your needs.
A three-digit score, ranging between 300-900, that determines your creditworthiness, a high score boosts chances of seeking financial aid on favorable terms and conditions. Generally, lenders consider a score of above 650 a good one.
You can easily check your score from credit bureaus, or on third-party websites by providing your name, mobile number, date of birth, and PAN number, among others. By paying bills on time, efficiently using your credit card, and avoiding borrowing too often, you can maintain a good score. Note that with a sullied score, it can be difficult to seek the aid needed.
The quantum of assistance
Before freezing upon your option, you need to contemplate the quantum of assistance needed. If you wish to seek assistance in the form of a personal loan, find out the exact amount needed. Note that the personal loan landscape has undergone a tremendous change of late due to the evolution of NBFCs.
It’s comparatively easy to opt for financial aid from NBFCs. Having said that, you must opt for an amount that you can easily repay without disturbing other essential commitments. In other words, avail a loan that you can pay back hassle-free.
Rate of interest
This is another vital consideration that you must take into account. Irrespective of the lender you choose, you need to pay a certain rate of interest. In case of personal loans, the rate of interest is slightly on the higher side as it’s an unsecured mode of finance.
Note that a high rate of interest has a direct bearing on loan EMIs. The EMI amount balloons with a high rate of interest and vice-versa. During black swan events like the one we are experiencing now, it can be difficult to serve a high EMI. Therefore, before seeking assistance, it’s advisable to check out the interest rate and opt for a lender who offers a competitive rate of interest.
If you are seeking aid from financial assistance, loan tenure matters. You must opt for a tenure within which you can easily repay your loan. Note that a long tenure decreases EMIs but results in higher interest outgo.
Having said that, if you feel a long tenure would help you in better plan your finances and repay the loan, do that. Note that one of the major advantages of aid in the form of personal loan is that lenders generally offer a flexible tenure, facilitating repayment. Also, make sure to read the fine print to know about charges such as processing fees and late payment penalty among others.
Often an overlooked aspect, approval time plays a vital role, particularly when you need assistance on short notice. For instance, in case of a medical emergency, the need for funds is quick and timely arrival can make a major difference.
Dig deep into your options and needless to say, you must opt for the one where chances of the money being credited into your account are prompt. Generally, NBFCs disbursing personal loans require minimum documentation, and the money reaches your account within a few hours. This comes handy during contingencies that can derail even the soundest financial plans.
Compare different offerings
This is another vital consideration. Before finalizing the options, compare them on different aspects like the loan amount, foreclosure charges, pre-payment charges, etc., and go for the one with flexible terms and conditions.
Also, make sure to have your documents ready for the lender to verify and process your application. In case of personal loans, you need to provide basic documents pertaining to your identity, address, and income, among others.
Factoring in the above points can help you in making the right choice and make the entire exercise smooth and hassle-free.