Home renovation, higher education, exotic vacation, wedding, medical emergencies, or debt consolidation are some expenses which may require a large chunk of your savings.
Opting for a personal loan is one of the ways you can keep your finance reserves intact while addressing these expenditures.
The approval time has become 5 minutes and the disbursal time 24 hours when you apply for a personal loan now. NBFCs are continually trying to make these products more accessible to customers to stay ahead of the competition. They are also combining loans with attractive and innovative features that make it more lucrative for you.
The procedure to apply for these loans remains the same although it is less time-consuming and more straightforward. You must have all the requirements to become an eligible borrower. Or else, your application may get denied.
Follow this checklist below if you are applying for a loan for the first time:
- Check your credit score
Lenders need applicants to have at least 750 credit score. These loans are unsecured, and the score is mandatory as it validates your creditworthiness.
The official website of CIBIL will provide with your credit score. You will have a low or even zero score if you have never availed any forms of credit before.
A secured credit card is one of the ideal ways to improve your credit score. Companies don’t require a high score to provide these cards as they are sanctioned against a fixed deposit.
You have to ensure the following to improve your credit score with a credit card:
- Refrain from using more than 50% of the credit limit.
- Always pay the total amount due.
- Always pay the bills within the due date.
Another point that you have to keep in mind is never to apply for multiple loans or credit cards at a time. Lending institutions perform credit checks when you do so which lowers your credit score. Hence, keep the application minimal.
Lenders may offer you personal loan online at competitive interest rate when you have a high credit score.
- Gather the required documents
You will have to provide various documents to establish your identity and occupation. Some of the documents that lenders require include:
- Employee ID card
- KYC documents (Driving License, Passport, PAN, Aadhaar, Voter ID, etc.)
- Bank account statements of the last 3 months
- Salary slips of the previous 3 months
Financial institutions may require additional documents when you apply for personal loans.
- Take a look at the eligibility criteria
You have to fulfil the eligibility criteria when you apply for a loan. Generally, the requirements differ with financial institutions.
The standard personal loan eligibility criteria include:
- You have to be between the ages of 23 and 55 years.
- You need to have a job with an MNC or public/private company.
- Use a loan eligibility calculator
A loan eligibility calculator is an online tool which informs you on maximum amount of funds you are eligible to receive. You only have to provide your income, date of birth, loan EMIs, and outstanding credit card debt.
- Use a loan EMI calculator
A loan EMI calculator will help you determine the EMIs you have to pay. These calculators have 3 independently adjustable levels for personal loan interest rates, principal, and tenor.
Use a personal loan EMI calculator to make your repayment convenient. Consider the tenor and EMIs before you apply for the loan.
Remember, longer tenors will come with lower EMIs in comparison to shorter tenors. Also, you will have to pay a higher amount of total interest with the loan through a longer tenor and vice versa.
- Lower your monthly obligations
Financial institutions give priority to those who have a debt-to-income ratio of 50% or less. It is recommended you pay off your current loans (if any) and clear your credit card debt to bring down the ratio as much as you can.
How to apply for a personal loan?
Applying for a loan can be done online within a few minutes. You have to provide your personal details like income, the organisation you work for, etc. A representative from the company may call you to confirm your loan.
Improving your CIBIL score first is a good way to start if you are about to apply for a loan for the first time. Compare the rate of interest and charges of various companies beforehand to get the ideal deal.