Everyone loves to live on their own terms and handle all situations without help. But then, there are situations when you need much more than your efforts. Medical emergencies, urgent travel, or replacing a faulty laptop may require funding, and you may not want to disturb your savings. Here, you can always avail of an instant Personal Loan.
Personal Loans are considered an easy line of credit for anyone, especially salaried individuals. However, there are a few important rules that you must keep in mind while looking for Personal Loan.
1. Check your Credit Score
A loan applicant’s credit score is one of the essential criteria considered by lending institutions. It helps lenders to evaluate the Personal Loan application. A good credit score increases the chances of your loan. Good financial habits like paying your loan EMIs and credit card bills regularly and timely, maintaining a low credit utilization ratio, and others help to maintain a high credit score.
It is also necessary to review your credit report periodically because your credit score is based on the information recorded in your credit report. It makes you rectify or prevent any possible error that might hurt your credit score and lower your loan approval chances.
2. Choose Suitable Loan Tenure
One should choose the loan tenure according to their repayment capability. Individuals with low repayment capacity and looking for Personal Loans with small EMIs can consider a longer repayment tenure. However, it would result in higher overall interest outgo compared to shorter-term loan tenure. You can consider prepayment of your loan if you have surplus funds. It will reduce interest. Check the foreclosure charges, if any, before opting for this option.
Lenders evaluate your repayment capacity while considering your loan application for approval. They compute your Fixed Obligation to Income Ratio (FOIR), which determines your existing income towards debt repayments. Financial institutions generally prefer an applicant with a FOIR of 40-50%, which also includes the EMI of your new loan. Therefore, you opt for the tenure that can keep your FOIR within this range.
3. Look For Pre-Approved Loan Offers
Lending institutions serve consumers with pre-approved loan offers. Generally, these are the offers for their existing clients. You should check a loan offer available for you with your existing lender. If you have maintained a good relationship and paid previous loans on time, the lender may consider you for a pre-approved loan. These loans can be disbursed quickly as the lender has checked your credentials provided by credit bureaus and can disburse the approved loan amount quickly.
4. Apply for Required Funds Only
A Personal Loan amount can be as high as Rs.50 lakh for an eligible applicant, which is enough to fund many expenses. Whether a big fat Indian wedding, a world tour, or higher education abroad, you can finance such requirements with a Personal Loan.or if you are want to apply for a Personal loan You should take a Personal Loan as per your requirement only. If you are eligible for a loan of a higher amount than your requirement, applying for the same amount is not necessary. It will increase your debt burden unnecessarily. Apply for an amount that you need at a point in time to meet planned or unplanned financial requirements. Remember to repay the loan on time to avoid penalties and maintain a good credit score.
5. Avoid Making Loan Applications With Multiple Lenders Altogether
When you make a loan application, the lending institution fetches your credit report to evaluate your behaviour towards your debts. It helps them know your creditworthiness. These lenders’ requests for credit reports are the hard enquiries for the credit bureaus. Every time a lender requests your credit report, it impacts your credit score. If you make many applications with different lenders within a short period, lenders may tend to reject your loan application. As a solution, you should compare different online lenders and shortlist the most suitable loan offer per your credit score and other eligibility conditions.
6. Avoid Frequent Job Switches
One of the loan eligibility parameters is your employment history and stability—the lender factors in the total work experience and current job period. Frequent job switching is considered a sign of an unstable career, and lenders may hesitate to approve such applicants with frequent job hopping in past years. Therefore, one should avoid frequent job changes.
Thus, considering these rules, get ready with your KYC documents and income proof to get a Personal Loan. You can opt for new-age lenders like Clix Capital, who follow completely digital loan processing with minimum documentation and quick approvals.