A professional loan can help you borrow the required amount to expand and scale your private practice. It may also help you manage the daily operational expenses of your practice and get specialised certifications, if required. While the loan comes with several such benefits, it is essential to consider some things before applying to get the most suitable solution depending on your financial situation and preferences. Here are some things to keep in mind:
Loan Amount and Purpose
The loan amount you wish to borrow and how you plan to utilise the funds are important factors taken into account by many loan providers. Most lenders will take these parameters into consideration when deciding whether to approve or reject your loan application. It may also impact the loan terms offered to you. This is because the higher the loan amount the higher the risk associated with the loan for the lender.
Thus, it is essential to borrow only what you need. Your debt-to-income (DTI) ratio should be low, showing that you have the repayment capability and can easily manage the new loan. Similarly, if you do not have a clear business plan, the lender may be unwilling to offer the funds to you.
Interest Rates and Charges
Before you apply for a loan, it is essential to check the interest rates and other charges. These generally play a major role in determining the potential borrowing cost of your loan and can lead to financial strain. When you compare lenders and check the rates, you can opt for an option which best suits your budget and repayment capability. Consider using a professional loan EMI calculator to assess the charges you may have to pay. This can help you plan your finances accordingly, making repayments easier in the future.
Alongside the interest rates, you may also be required to pay certain additional charges like a processing fee and convenience fee. Be sure to get a complete understanding of the various fees and charges applicable to your professional loan before applying. These generally have a significant impact on the overall borrowing cost and can come as a surprise later on if you fail to enquire about these. Take such charges into account when assessing the total cost of the loan and budget accordingly.
Loan Tenure
The repayment period you choose has a major effect on the loan amount and your repayment capacity. Typically, a loan for advocates is available for a period of up to 96 months, depending on the lender you choose. Additionally, the tenure offered to you is dependent on your eligibility for the loan and the lender’s policies.
When you choose a shorter tenure, the total repayment cost is typically lower compared to loans with a longer tenure. However, in this case, the EMI amount is higher. Thus, if saving on the interest accrued across the loan tenure is a priority for you, consider opting for a shorter tenure. Meanwhile, if managing your monthly obligations is difficult for you, a longer tenure may be more suitable for you.
Cash Flow
As an advocate, your income may not be stable and regular. So, you must ensure that the loan terms align with your cash flow. Check whether the lender offers flexible repayment options if you have an irregular income. In such cases, consider having an emergency fund, which you can use to pay a few EMIs.
This can help you manage your professional loan better without defaulting on any payments in case of irregular income affecting your cash flow. On the other hand, if you earn a high amount, consider making lump sum prepayments to close your loan sooner. This can help you become debt-free faster while saving on interest charges. However, do note that making a prepayment or foreclosing a loan can carry charges. Be sure to account for these before opting for this facility.
CIBIL Score and History
Having a good credit score is important to get a loan at favourable terms. Most lenders require you to have a CIBIL score of 750 or more. This score is a representation of your credibility and repayment ability. It is based on your credit behaviour and history. The score helps the lender gauge the risk associated with the lending, based on which your loan eligibility is determined.
If your score is low, consider taking some measures to improve it before applying. Pay your credit card bills and EMI dues on time, keep your credit utilisation ratio lower than 30%, and have a healthy credit mix (secured + unsecured). Additionally, be sure to check your credit report periodically for any discrepancies. Ensure that these are resolved at the earliest for an accurate representation of your creditworthiness.
By paying close attention to the things listed above you can ensure a smooth borrowing process. It will help you negotiate better loan terms, enjoy flexible repayment options, and get quick approvals.
(Disclaimer: This is sponsored content. The liability for the article solely rests with the provider. The content has not been verified by India TV channel and IndiaTVNews.com)