Undeniably, securing a personal loan from banks or NBFCs can be a little bit tricky. This is because they are availed for just about any reason–medical expenses, education needs, house renovation, or as a supplementary source of income to meet your needs during tough times, like COVID, for instance.
In India, a personal loan often goes unsecured, which means you don’t have to provide any asset in exchange for the funds disbursed. Thus, it is the sole discretion of a financial institution to grant or reject your loan application. But, no denying, one can go through quite a bit of ordeal to get their loan application processed. It takes a lot of understanding for an individual regarding your income standards, credit score, documentation, lender preference, and a few other factors in between.
So, what are the effective ways to get your first personal loans from banks? Let’s have a look at the below-mentioned points:
First, find out why Do You Need a Personal Loan?
This should arguably be the first question that needs answering. We all face situations that are often out of our control, and while money can help with most of them, it is imperative to understand and consider the motive behind securing a personal loan.
These days, people tend to fall for flashy cars and expensive gadgets to keep up with an enviable lifestyle and borrow for no good. Besides, some people opt for personal loans to invest in other financial schemes like mutual funds. However, they understand that such investments are prone to market risks and might not generate lucrative returns as envisioned during unfavorable economic conditions. As a borrower, however, you will anyway have to keep repaying. In other words, such bad decisions offer more room for extended financial liability.
Hence, one is recommended in the best interest to consider whether their reason or motive for securing a personal loan is justified. If you can’t seem to find an answer on your own, you might as well reach out to a financial expert.
Why to Maintain A Good Credit Score?
Credit scores are a rather crucial metric that determines your eligibility to secure any loan. All those who own or have used a credit card before will know why and what makes a credit score so important. A credit score usually ranges from 300-900. Anything above 850 is considered good.
However, some people fail to keep their score up at the desired range, which affects their creditworthiness, thus having their loan application refused.
Other notable factors that can impact your credit score include:
- Not paying your credit card dues/other loans EMI’s on time,
- Getting rejected for credit card applications multiple times,
- Hard pulling of score from the official website of CIBIL and
- Settlement of credit card owing to non-availability of funds.
The easiest way to maintain a healthy credit score and help secure a personal loan is to deter from exceeding 30 percent of your credit card limit.
Nevertheless, having a bad credit score doesn’t mean the end of the world. Certain credit score repair agencies can help you figure out any dispute with your score and gradually improve the same to raise your creditworthiness. If you are tagged with a bad credit score, apply for an NBFC personal loan for bad credit. You will be able to get the required money by meeting all terms and conditions of the lender. Pay the loan amount on time and repair your credit score again, which helps you in future loan applications. The good thing is that you can get a personal loan online, which is free from multiple hassles associated with other traditional loans.
Pay off All Your Existing Loans and Credit Card Bills
In today’s world, people take loans for several critical financial commitments. It’s not wrong to borrow a loan, but you must exercise precaution and patience as much as possible. It would be best if you clear all existing loans and credit card bills. During the verification process, if bank’s representatives find that you have pending loans and credit card bills, it creates a negative perception in their minds. They may have the feeling that you won’t be able to repay the borrowed money on time. On the other hand, a neat and clean record makes a long-lasting impression on credit lenders. So, they happily process your application for a personal loan.
Determine Your Repayment Capacity
Securing a personal loan is one thing and repaying it on time is another. Hence, always reconsider your repayment capacity before you go ahead with a personal loan application. These days, you have multiple EMI calculators at your disposal, available online, which can help provide the exact figures. However, the general rule of thumb is that your EMI payments should exceed 10-15 percent of your monthly income. Otherwise, you could be ravaging your daily expenses, leading to a financial mess. So, calculate the EMI of different offers and take a personal loan accordingly.
Do Carefully Analyze Loan Offers
While trying to get a personal loan, you can scrutinize different offers to get the best one.
Personal loans usually attract a higher rate of interest compared to other loan types. It can range anywhere between 11-14 percent and, in some cases, even higher than that. Thus, selecting the lowest possible interest rate to decrease repayment figures and overall loan expenses makes sense.
While many people tend to opt for a lower EMI, they invariably fail to understand that they will have to keep paying the loan for a long term, which at times can turn out to be inconvenient, especially when you or your family is facing an emergency. Also, you will have to pay a higher rate of interest which is always detrimental for your finances altogether. Therefore, as a borrower, one should always aim to spend no more than 35-40 percent of your earnings towards all your debts–including all your loans, personal or not, and mortgage, if any.
Show All Sources of Income
While considering your application for a personal loan, it is essential to display all sources of income apart from monthly salary. Always remember, a borrower’s loan repayment capability is vital for banks. The more sources of income you have, the easier it becomes for banks to process your application fast and approve it without fearing the non-repayment of the borrowed money. For example, you may have income from a fixed job, room rent, family grocery shop, business venture, etc. If you display all sources of income, bank offers will have the impression that they can quickly get back the loan with applicable interest fees. Bank executives will examine all the sources of income and will process your application quickly if you meet all terms and conditions without fail.
Try your best!
Contrary to your expectations, taking a personal loan is not an easy task at all. You must go through different time-consuming formalities and verification processes that may irritate you. Therefore, you must try the best NBFC for a personal loan. A non-banking financial company helps you in the loan application, processing, verification, and acquisition process. They have a team of experts who provide you with all-inclusive knowledge about personal loans and help make an intelligent decision. For instance:
● The MyHowtoo is ideal for submitting your application for a personal loan and getting the desired amount (as per your eligibility criteria) with great ease.
Arrange All Documents on time
Don’t be alarmed when we tell you that many folks in India fail to secure a personal loan due to the non-availability of documents. As You have come to know by now, a personal loan doesn’t ask for any assets in the form of collateral. However, the borrower must furnish all required documents requested by the lender institution during the loan processing. Thus, it is necessary to get hold of every paper and keep them updated and handy so that you can produce it readily without any delay.
You must know that in the case of a personal loan, the numbers of documents required are comparatively lower than what you are expected to provide when applying for other loan types, like a home or business loan. Rest assured, you can witness a fast and hassle-free disbursal process when you have all your documents sorted in one place. Listed below are some essential documents that lending institutions often ask you to furnish when applying for a personal loan.
Documents Required for Salaried Employees:
- ID Proof- Passport / Driving License / Voters ID / PAN Card (any one would do)
- Proof of Residence- Rental or License Agreement / Utility Bill (not more than three months old) / Passport (anyone would do).
- Latest three months of Bank Account Statement (where your salary is credited).
- Salary slips for the last three months.
- 2 Passport Size photograph
Documents Required for Self-employed Individuals:
- KYC Documents: ID proof, Address proof, Birth Certificate.
- Proof of Residence: – Rental or License Agreement / Utility Bill (not more than three months old) / Passport (anyone would do).
- Income proof (audited financial statements of last two years).
- Latest 6 Months Bank statement.
- Office address proof.
- Proof of residence or office ownership.
- Proof of continuity of business
Your decision to take the first personal loan from banks is a serious undertaking and comes with a huge liability. Generally, ordinary individuals don’t understand different terms and often make mistakes unknowingly, which costs them dearer. Therefore, it is better if you join hands with a highly-qualified and experienced loan specialist. He will provide you with additional information and offer a helping hand throughout the entire loan application and acquisition process. Also, remember that personal loan interest rates keep fluctuating. So, keep a close eye on the interest rates and choose a personal loan with the lowest possible interest rate.
Taking a personal loan from banks may help you meet unavoidable but necessary financial commitments with great ease and comfort. All you need to do is make the right move following the due process.
It is also essential to establish the authenticity of the lending organization. After successfully securing a personal loan, ensure that your repayments are on time and that you are never counted as a defaulter.
To make the most out of your loan, try to spend the amount wisely. In other words, avail what is required even if you are eligible for it. That way, you can significantly lower your financial liabilities.
Also, if you have surplus funds at hand, you might want to foreclose your loan. While this option might not be feasible at times, doing so can further establish your creditworthiness and uplift your profile. Finally, check your CIBIL score before applying for a personal loan and do the needful to make yourself eligible for the loan. Banks and other credit lenders pay attention to this factor before approving your application.
Frequently asked questions-
Check out below the answers to a few FAQs related to personal loans:
● What is the minimum salary requirement for a personal loan?
The minimum salary requirement to get a personal loan is INR 20,000/-
● How much personal loan can I get if my salary is INR 30000?
Suppose you don’t have any other EMIs to pay, then you can multiply your monthly earnings three times to get the maximum loan amount you would be eligible for
● How is the loan amount calculated?
Typically, the rate of interest (R) on your loan is calculated monthly i.e. (R= Annual rate of interest/12/100). For instance, if R = 15.5% per annum, then R= 15.5/12/100 = 0.0129.
● What is the minimum eligibility for a personal loan?
You must be an Indian citizen, aged between 23-57 years, employed in a public or private organization, or self-employed.
● How do I qualify for a personal loan?
You must be an Indian citizen, aged between 23-57 years, employed in a public or private organization, or self-employed. Also, the minimum salary requirement to receive a personal loan is INR 20,000/-
This article is written by MyHowtoo