7 MinsSept 8, 2021
Life throws a curveball at us when it is the least expected. Take, for instance, the COVID-19 pandemic––a health crisis––and how it has affected most nations. It highlights how unpredictable life can be, and the importance
of being financially prepared.
If you are looking for funds to deal with the COVID-19 emergency or any medical emergency, a Personal Loan may be your loan in need or to put it simply, a “financial lifeline.”
Here’s why you should consider taking a Personal Loan…
- You can get a Personal Loan easily with minimal paperwork.
- Unlike other loans, you don’t need to pledge or mortgage your assets (since it is an unsecured loan).
- Applying for a Personal Loan ensures that your existing investments or assets assigned for vital financial goals (viz. child’s education needs and your retirement) are untouched.
- Further, with easy EMI options available with a tenure that could range from 12 months to 60 months, repaying the Personal Loan becomes comfortable.
That said, before you apply for a Personal Loan, it is advisable to do the following:
- Evaluate your need, i.e. how much money do you have to borrow
- Compare personal loan interest rates, processing charges, the penalty for pre-payment/foreclosure, etc., because all of these charges add to your cost.
- Check your eligibility (You should be over 21 years of age, earning a net monthly income of Rs 15,000 or more, and have a respectable credit score).
- Check the interest rate, tenure, processing fee, etc.
- Understand how much the EMI will be on your personal loan (using the Personal Loan EMI calculator).
- Choose the loan tenure (which can range anywhere between 12 to 60 months) such that the EMIs do not turn out to be a burden.
Finally, keep all your necessary documents ready and apply by duly filling in a Personal Loan application form.
Typically, the documents required are age proof (Passport, Aadhaar, PAN, etc.), address proof (Aadhaar, Passport, electricity bill, telephone bill, ration card, etc.), photo identification proof (Aadhaar, Voter Id, PAN, Passport, driving license,
etc.), salary slip, Form 16, and Income Tax Returns.
For the bank, while granting the loan, what matters is your personal credentials, the nature of your job, the company you work for (whether private limited or public limited), your net monthly income, your residual working lifespan, your loan
requirement, and your repayment capacity (exhibited by your credit score).
[Also Read: How to get an Axis Bank Personal Loan in minutes]
When you look for a Personal Loan for a medical emergency, take into consideration these five simple tips:
- Maintain a healthy credit score – A bank evaluates your credit behaviour and creditworthiness before granting any loan. For that, your credit report (sourced from credit information companies’ viz. CIBIL,
Experian, Equifax, Highmark, etc.) is scrutinised to judge your credit score.
Higher your credit score (of 750 and above), the better it is for you, the applicant. Make it a point to maintain a high credit score. It may give
you the power to bargain for the best rate of interest (which can reduce your EMI (or Equated Monthly Instalment), and/or ensure that the processing fee on the loan
is the least or even waived off.
- Rectify the error/s in the credit report immediately – If you find any error in your credit report–– be it personal information or account-related (incorrect credit limit, account status, new accounts
not showing, incorrect showing of late payment, outstanding payment, payment history, etc.) – get it rectified immediately as it may be weighing on your credit score. Write to the bureau and/or do it online by visiting the online
dispute resolution section of the respective bureau’s website. However note that depending on the complexity of the error, it may take some time (around 30-45 days) for the dispute to be resolved.
- Do not make multiple loan applications – Too many loan applications weigh on your creditworthiness and usually pull down your credit score. When you apply for a personal loan with another institution or bank soon
after rejection from one or more, your credit score could drop further.
Hence, avoid applying to several banks or lenders for the loan; as it gives a signal that you are desperate for credit. Make sure you apply only at
places where the chance of getting approval on your loan application is higher. Also, check who’s offering the best deal; evaluate the loan application process and the terms & conditions.
- Ideally, you should not have availed of a personal loan in the last six months – This does not depict a very healthy picture about your personal finance. It even questions your ability to repay owing to the increasing
debt obligation. Hence, ensure that the time gap between your loan applications is more than six months.
- Maintain a fair balance between secured and unsecured loans – You may be already repaying a loan, say a home loan or an auto loan.
In such a situation, if you need to avail of a Personal Loan for a medical emergency, recognise your need and borrow sensibly. Avoid creating a mountain of debt, which could land you in debt overhang.
Consolidate your
debt (by maintaining a fair balance between secured and unsecured loans). This will reduce your interest outgo and help you repay faster. All loans should be repaid on time so that it appears reassuring to the lender and potentially improves
your credit score. If you keep your debt burden is low, the chance that your personal loan will get approved quickly will be higher. Ideally, your EMIs should not exceed 40-50% of your net take-home pay.
A Personal Loan proves extremely handy in time of need, such as a medical emergency. But make sure you follow a sensible approach so that it does not run you down emotionally and even financially.
Personal Loan Enjoy flexible repayment schedules and competitive interest rates.
Disclaimer: This article has been authored by PersonalFN, a Mumbai based Financial Planning and Mutual Fund research firm. Axis Bank doesn't influence any views of the author in any way. Axis Bank & PersonalFN shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision
