A personal loan is one of the most popular financial aids that people opt for when they require money to meet their financial expenses. Besides, the ease of paperwork and restriction-free use of money makes the personal loan, one of the most preferred choices amongst individuals. It means that you can use this amount for going on vacation, planning a dream wedding, renovating your house, incurring medical expenses and other needs. However, while availing a personal loan, one must consider the fact that this loan comes at a higher interest rate and thus, it will add EMIs to your monthly budget.
You need to pay the EMI on time and failure to do so will impact your credit score and will make things difficult for the approval of your future loan applications. Besides, availing personal loan requires a good credit rating and matching the eligibility criteria specified by the bank. If you fail to do so, the loan application might get rejected. So, we bring you tips that will help in making the personal loan application easy and hassle-free.
Tips to follow to be Eligible for a Personal Loan Always
1. Need Analysis
One of the first things that you should do is the need analysis, i.e. why do you need the loan. Remember, personal loan come with an EMI, any delay or failure of repayment will adversely impact the credit ratings, thereby hampering your credit history and credit score. Check why do you need money, do you need a personal loan or you can arrange money from somewhere else.
2. Eligibility Parameter
This is an important point that you need to consider. Every loan comes with an eligibility parameter; the person who is not able to match these criteria will not have his/her loan approved. So, the best way out is to check the eligibility parameters. For example, if you want to take HDFC personal loan, then you need to log on to its website from where you will get a complete insight into the eligibility criteria for HDFC personal loan. Similarly, for other banks, you can log on to their portal and check for the same. There are a number of aggregators as well that provide you the complete information on their website thus saving you the extra efforts required for checking each bank’s website.
3. Credit Score
When we talk about eligibility parameter, then one of the key factors which banks consider for approving the loan is the applicant’s credit score. A person with good credit history and credit score will have easy loan approval, whereas, the person who doesn’t have a good credit score may have to face rejection of the personal loan application.
HDFC personal loan demands an individual to have a credit score of 700 or more for loan approval. This number may vary, but you must fall in the slab of good credit score to have your loan approved. In case you have a high credit score in the range of 750 to 850, your loan approval will be instantaneous.
4. Low Credit Score means a Higher Interest Rate
Well, there are prospects that the bank might approve your personal loan application even with a low credit score, but that means you will have to repay the loan at higher interest rates. Yes, sometimes looking at your current salary account the bank may approve your loan application, but it will come at a higher interest rate. So, you must cross-check whether or not you will be going ahead with a personal loan or not.
5. Keep All the Papers Ready
Banks will ask you for the different papers supporting your claims like credit history, bank statement, address proof, ID proof etc. It will assess your documents and based on it; the loan application will be adjudged. In case you fail to provide all the documents on time, you loan application may not get approved on time or not get approved at all.
6. Compare the Interest Rates
Yes, another factor that will help you with personal loan application is the interest rate. Since it has a direct impact on the monthly EMI, it becomes important that you should compare the interest rates. The starting rate of interest is 11%, and it may go as high as 20% or more. This variation depends on the bank, HDFC personal loan interest rate is 11.25 % and for other banks, it may change drastically. Make sure that you make a comparison of the same before applying for the loan.
7. Do not Send Multiple Applications
One of the key things that you must take into account is that you must not make multiple loan applications; this will dilute your probability of getting the loan approved.
8. Don’t apply for a personal loan if you are already under the debt of another loan
If you are already paying the EMI of certain loan, then it is advisable that you do not apply for a personal loan. The new loan will increase the loan burden and will impact your finances. While submitting a loan application, you must ensure that there is no other loan application in the last six months.
9. Ask for Pre-Payment Charges
So, you have decided to apply for a personal loan, while looking for other factors, you must ensure to check what the pre-payment charges are. Most of the banks have a lock-in period which one needs to fulfill before making the prepayment, Ask your bank if they have any pre-payment charges. Usually, it is some percentage of the outstanding amount.
10. Duration of Loan Disbursal
Well, personal loans are disbursed with a few days, but sometimes it may take time. So, you must check with the bank how much time it will take to disburse the loan. If you are okay with the time duration, go ahead with the application process.
sourav kumar is passionate writing about loans, insurance, credit card, financial tips