If you are submitting an instant personal loan application for the first time, then you must know the important details of a personal loan. Applying for a loan without researching is a typical error made by many first-time borrowers.
Among all the important factors, checking your eligibility, comparing different lenders and knowing about the loan terms are the most crucial. This will help you increase your chances of loan approval while getting the best terms on your loan.
Read on to discover the important factors you must consider before applying for a personal loan.
Things to Keep In Mind before Applying for a Personal Loan
Today, availing a personal loan has become easier than ever. With so many lenders and easy online loan processing, your loan may get processed within hours. However, before submitting an instant personal loan application, you must make sure that you are making the right borrowing decisions.
Here are a few things that you must consider before applying for a personal loan:
1. Maintain a Close Watch on Your Finances
Before submitting an instant personal loan application you should first check on your finances. Your income is one of the primary factors a lender examines when you apply for a loan. Typically, to qualify for a personal loan, you must have a stable monthly income of Rs. 15,000.
This is necessary for the lender to determine whether or not you will be able to repay the loan in full and on schedule. A higher income makes you more eligible for a loan. Thus, if you have any additional income like income from investments or rental income, then mention that in your loan application. In addition to this, maintaining a low income-to-debt ratio is another important factor.
2. Check your Credit Score
One of the most crucial factors that lenders consider when they examine loan applications is your credit history. When you avail a loan, credit bureaus keep a record of every aspect of your repayment history. A good credit score demonstrates that a person is a reliable borrower.
Thus, a good credit history makes you more likely to get approved for a personal loan of a higher amount. Your lender is also likely to offer you a loan with favourable interest rates and repayment conditions.
3. Consider the loan interest rate
The interest rate levied on the personal loan is the most important aspect that you must consider while making your borrowing decision. It determines your total loan cost and impacts your loan affordability and EMIs. Even a slight change in the interest rate can make a huge impact over the course of the loan, especially for higher loan amounts and longer loan terms.
Make sure to compare different lenders and their loan offers. Sort out the best offers that are available for you. While noting the interest rates, you must also keep an eye on the fees and charges levied by your lender. They too can influence your loan affordability. Always go for a reputed lender who offers you the best loan terms. You can further negotiate with your chosen lender if you have a suitable lending profile.
4. Have your documents handy
Before permitting a potential client to use their services, every bank or NBFC must adhere to the Know Your Customer (KYC) procedure. The goal of KYC is to reduce fraud and confirm a customer’s identity. Keeping all of the paperwork needed for a personal loan is one of the most crucial steps.
For personal loans, the documentation is relatively simpler. You just have to submit your identity proof, address proof, and income proof. It becomes further simplified if you have an existing relationship with the lender. However, do note that the documentation requirements may vary from lender to lender. So, make sure you check it on their website or on the loan app.
5. Additional Fees and Costs
There could be several expenses associated with a loan. The most common charges include processing fees, documentation fees, upfront fees, GST, the loan penalty fee, foreclosure charges, loan transfer charges and more. Different lenders may have different fees associated with the loan. You must read the fine print and loan terms to discover these fees and charges.
You can also negotiate with the lender or check for promotional offers. Many lenders may offer discounts on processing fees and other fees during the festive time. They may also run promotional offers for corporate employees or government employees. Keep an eye on such offers to get the best loan offer.
What Are the Eligibility Criteria for a Personal Loan?
To apply for a personal loan you need to get past the following eligibility criteria:
- Age: 21 to 58
- Citizenship: India
- Employment: Both self-employed and salaried employees can apply
- Income: 15000 and above
How to Apply for a Personal Loan?
To apply for a personal loan follow the steps given below:
- Visit the lender’s website or loan app
- Browse to the application page
- Fill in all the mandatory details
- Submit the necessary documents for verification
- Once your application is verified the loan amount will be deposited into your bank account immediately.
Submitting an instant personal loan application is relatively easy if you know the important loan terms. Knowing the criteria used by lenders to evaluate personal loan applications can help you get quick approval and secure favorable loan terms.
In addition to these, you must have a proper repayment plan in place before applying for a personal loan. A personal loan is a very helpful financial tool only when you manage it smartly. Not having adequate finances for repayment can lead you to a financial mess. So, be very cautious and calculative while applying for a personal loan.