What are personal loans used for?

Personal loans are a great way to finance a large purchase, such as a car or a house. They come with fixed interest rates and can be used in combination with other financing options, like a credit card or a home equity loan. In this article, we’ll explain the different types of personal loans available and how they work.

Let’s look at some of these common misconceptions about personal loans

Personal loans take a long time to process.

Borrowers often refrain from applying for a personal loan, as long as the processing period and the lourd approval process are comparatively longer. Nevertheless, since personal loans are unsecured in their nature with no protection provision, they are usually paid out within 2-7 working days of the loan application, with limited documentation. In fact, certain borrowers claim to pay immediate personal loans within the same day.

Poor credit score means denial of the loan.

Although the credit score for the assessment of your application is one of the main considerations weighed by the borrowers, a poor credit score does not automatically mean an outright rejection. Depending on other eligibility criteria, including your disposable income, work profile, employer profile, etc., lenders will still accept your application. Bear in mind, though, that if you have a poor loan score, the interest rate is possibly higher than someone with a higher credit score.

Banks are the only personal loan lenders

Borrowers believe that only banks provide individual loans and thus do not find NBFCs or digital lenders in their new era, when banks refuse their application for their personal loans. Although NBFCs and digital lenders typically charge higher interest rates, they are flexible with regard to banks’ eligibility for loans and approvals.

Personal loans interest rate is high

Personal lending is sometimes regarded as an costly lending choice. That is, however, particularly true for those with a bad credit record. Many lenders offer personal loans up to 10.5% p.a. For reward professionals with a good credit record. The interest rate on personal loans is not too high because there are no guarantees or premiums, such as in the case of home loans, auto loans, equity loans, or gold loans, etc.

Avoid applying for quick succession loans or credits

Whenever you apply for any kind of loan, creditors make a difficult investigation into your credit report. It represents your credit history and minimizes your ranking. Although 1 or 2 applications might not have a serious impact on your ranking, rapid succession can leave a mark and make you feel hungry. It is a problem for borrowers and reduces your personal loan availability.

Once you apply for an online personal loan, please follow these tips to help you get the financing you need in a hassle-free way. To simplify the experience further, creditors such as Banks/NBFC provides you with access to a free personal loan entitlement calculator that tells you exactly how much you qualify. This is an intuitive device that is easy to use and takes minimum effort and still provides reliable results.

How do you improve your chances of a personal loan?

Credit Clean-up

The credit score is one of the key variables viewed by lenders. For a good credit score, securing a personal loan is simpler. If you have a low score, you have to check your reports to see if there are mistakes. Sometimes, simple mistakes could have a negative effect on your scores and you need to report them to CIBIL if you find any.

Re-balancing your wages and debts

If you qualify for financial loans, lenders request proof of income to assess your debt-to – income ratio. Consider selling liquid assets like inventories or gaining money by working part-time to raise your annual profits. This will increase your debt-to-earnings ratio and increase your chances of receiving a loan.

Take Co-signor / Guarantor

if it is difficult to obtain your own personal loan, you can apply for one by adding a co-signor or guarantor. The person you choose as a guarantor should have a good credit rating. Their main goal is to ensure that you repay the loan. However, they would still be liable for repaying the loan if you can not do so. Choosing a person with a credit score over 750 would dramatically improve your chances of obtaining a personal loan.

Limit Your Borrowing

It may be risky to ask for more money than you need to achieve your financial goals. Make sure you decide how much you need and then apply for that particular number.

Choose the right lender

Every lender has its own credit scores and income requirements. Select a lender, whose eligibility requirements you meet and apply accordingly, while looking for personal loans. The problem with multiple lenders is that every one checks your credit score and your credit scoring decreases, though minimal, until your credit report is complete.