What do you need to get a personal loan?

Instant personal loan

A personal loan, or an unsecured loan, is a loan which you can apply for without the need for collateral and with minimal paperwork. Personal loans are usually approved simply by analyzing the individual’s financial history and profits. The interest rate and the amount of loan on personal loans shall be calculated by the borrower ‘s creditworthiness.

Personal loans have many functions and are readily available to both working and unemployed persons. Life will ever cast a surprise. So if these surprises are unexpected costs, then we have a personal instant loan for your needs. We trust your dreams and stand by you when you have to pay a significant, unforeseen expense. Personal loans have many functions such that the funds can be used for other needs. You will have a personal loan to fund a wedding, travel, children’s schooling, vacations, medical expenses, any large-scale shopping, recovery and even debt reduction.

Quick disbursement of funds, no end-use restrictions, minimal paperwork and no collateral requirement make personal loans a favored choice for lending in unexpected financial situations. When applying for personal loans, lenders sometimes neglect to pay attention to some main factors , leading to a denial of the application for loans. Let’s look at 5 errors that we have to avoid in applying for personal loans.

Do not test your credit report

Each time you apply for some form of loan , lenders test your creditworthiness by receiving your credit report from the credit office. Your credit report indicates how accountable you have been in the past. In general, banks and other institutions find a credit score over 750 to be safe. Unless the credit score of a creditor is lower than 750, the loan will possibly be denied. Many borrowers use credit risk pricing whereby they assess their interest rates in the applicant’s credit score. In this scenario, a high credit score will assist you in getting loan deals at lower rates.

When submitting a loan application, your review of your credit report will also eliminate any potential mistakes that could lead to your credit score being circumvented, resulting in loan refuse. Be sure to report the errors, if any, to the office and the lender concerned for correction as soon as possible.

Send multiple lenders direct applications

Once you apply directly to lenders, credit reporting requests from credit offices to evaluate your creditworthiness are initiated. These requests from the lender are called hard inquiries and will be listed in your credit report’s inquiry section. Submitting several loan applications within a short time will decrease your credit score significantly.

Instead of applying for direct personal loans, visit the financial market website to compare and pick the most suitable lender based on your credit score, income and other eligibility requirements. Although these markets often receive your credit report from agencies, these demands are known as soft inquiries that have little effect on your credit score.

Not compared between different prospective lenders

Since the cost of personal loans will vary from 10.35% to 24% p.a., it is wise to visit financial markets online to compare and determine the best loan product and loan based on your loan performance, income and other eligibility requirements. Don’t limit your reference to the interest rate alone. Before zeroing in on a specific borrower, the rate, prepayment charges and other relevant terms and conditions must also be taken into account.

Ignoring your willingness to repay

Lenders assess the repayment capacity by calculating your Fixed Income Bond, i.e. the proportion of your existing debt repayment income. As FOIR applicants are generally preferred by lenders within 50-60% (including the EMI of the new loan), make sure that you opt for a loan tenure whose EMI is in line with this. Higher repayment potential lenders can choose a longer repayment period to use a higher EMI number. However, longer tenure would also imply higher interest rates and therefore consider prep-aiding your personal loans whenever surplus funds are available. By doing so, ensure that the net expense savings greatly outweigh the lender’s advance payment costs.

Do not consider alternative options for loans

Do not ignore alternative loan options, like secured loan options, including supplementary home loans, securities loans, property loans, and FD loans. Much like personal loans, these loans have no limits on end-use and typically have lower interest rates and longer term opportunities than personal loans. Existing home loan borrowers, for example, can opt for additional home loans at interest rates usually as low as 8 percent p.a. and term up to 30 years, depending on the duration of the remaining home loan. Likewise, those with large long-term investments should start using securities loans in order to fund their financial deficits at lower interest rates without selling their securities

Documents Required for Personal Loan

The documents required for availing a personal loan

  • Duly filled and signed application form
  • Proof of identity
  • Proof of address
  • Proof of age
  • Salary slips for the last three months (for salaried)
  • Bank statement for the last six months
  • Income tax returns or form 16
  • Proof of Income / financial statements (for self-employed)

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