Things to Keep in Mind Before You Apply for Personal Loan

Minimal documentation, quick disbursal, no restriction on usage of the loan and minimal security requirement makes personal loan one of the best borrowing choices to meet your immediate fund requirements. However, the unsecured characteristic of a personal loan often makes lenders adopt a vigilant approach when approving your loan application.

Explained here are important checkpoints that you must steer clear to enhance your personal loan eligibility chances:

• Assess your credit profile: Credit profile is one of the initial filters utilized by the lender to evaluate your credibility after you apply for personal loanv. Usually, if your score is 750 or more, you have higher personal loan eligibility chances than those with lower credit scores. Thus, you must strive to form and maintain a strong score. Consider adopting good financial habits such as containing CUR (credit utilization ratio) within 30%, repaying EMIs and credit card dues within time, maintaining a balanced mix of credit, monitoring your co-signed and guaranteed loan accounts etc.

Also, as the score is determined based on the data provided by the issuers and lenders, any error or clerical mistake on part of the lender or issuer can lower your score as well as your personal loan eligibility. Hence, assess your report periodically to detect any incorrect info and timely report them to the concerned body for instant credit score enhancement. An enhanced score automatically boosts your personal loan eligibility chances.

• Select the repayment tenure as per your capacity to repay: Lenders evaluate your capacity to repay by considering your repayment obligations. They generally prefer lending if your repayment obligation involving the personal loan EMI is within 50 to 60 percent of your monthly income. If your debt obligation is on the higher end, then you are generally considered to hold higher loan default chances. Thus, make sure to select the repayment tenure whose corresponding loan EMI keeps your entire repayment obligation under the assigned limit.
• Compare amongst different loan offers: Interest rate of personal loan can range anywhere from 9% to 24% p.a. Hence, it is important to compare the personal loan offers of as many lenders as possible before selecting a specific lender. Start your search for a loan by directly contacting the financial institution with whom you share a consumer relation. Follow this up by approaching online lending markets to consider different personal loan offers available to you by other lenders.

Note that when comparing your personal loan offer; do not limit your research to only loan’s rate. You should also compare other crucial loan linked features like loan amount, processing charge, repayment tenure, etc., before zeroing on a specific lender.

• Do not submit personal loan applications with multiple lenders: Whenever you apply for any credit option, financial institutions tend to inquire for your credit report from the bureau to understand your credibility. Such lender requested reports are called hard enquiries, which pulls down your score marginally. Multiple such lender-initiated requests for credit report can depict you as a credit hungry individual, holding the potential to default in future and thus bureaus lower your score by a huge margin. Reduction of score by massive number of points thereby pulls down your eligibility for personal loan. Instead, you should approach online financial markets to check your personal loan eligibility for a specific lender and accordingly apply for the loan based upon your suitability. While financial marketplaces also request for a credit report to understand your loan eligibility from the bureau, such requests are called soft enquiries, which do not have any impact on your score.

Conclusion

Personal loans can prove to be advantageous if taken up for the correct reasons. Also, it is crucial to ensure your lender is a transparent player and that all your repayments are consistent and prompt. You can check your promptness to repay the loan, using the personal loan eligibility calculator. Such calculators allow you to calculate your EMI based on your repayment capacity.