When should you apply for a personal loan? Sometimes you may have extraordinary or unforeseen expenses that you can finance from your income, such as B. a children’s wedding, a home improvement, or even a vacation. During these times, it is advisable to apply for a personal loan to deal with this temporary lack of funds.
You can improve your chances of getting your personal loan approved by following these tips:
- Check your credit before applying for a personal loan– If you apply for a loan without knowing your creditworthiness, you run the risk of being rejected for a low score. The first thing to do when applying for a loan is to obtain your credit report so that you do not receive unpleasant surprises when applying for the loan. You may think you scored well for paying all your bills on time, but there may be other factors that could lower your score, such as B. high credit utilization, being the guarantor of a loan that is delinquent, or even report fraud or errors on your credit report. Get a copy of your credit report so you can keep up with your credit situation and correct mistakes to avoid the possibility of rejection.
- Make sure you have a credit score of 750 or better – If you have a credit score in this area, you have a better chance of getting your personal loan approved. Your creditworthiness is especially important in a personal loan, as there are no guarantees that lenders can use to protect your money in the event of default. Lenders generally look for a 750 credit score to assess whether you are eligible for the loan. If your score is below 750, identify weaknesses in your credit profile and work to improve your score. If you are turned down for a poor rating, each rejection will cause your credit rating to drop even further, making it increasingly difficult to get your credit back.
- Don’t apply for multiple loans – It’s tempting to apply to multiple banks/lenders at the same time to maximize your chances of getting approved by at least one lender. That is not a good idea! When you do this, potential lenders will feel that you are “credit hungry” and that you will have to turn to multiple sources to finance your expenses. Also, too many loan applications without matching approvals can cause your credit score to drop. Be sure to apply only where you have the best chance of getting approved.
- You shouldn’t have had a personal loan in the last 6 months – If lenders find out that you recently got a similar loan, they may not be sure you will be able to shoulder the burden of the loan. New debts and amortizations. There must be a gap of at least 6 months between loan applications. If it is for a non-urgent reason, p. Eg For example, for a vacation or renewal, it is better to wait a bit before reapplying.
- Have a mix of secured and unsecured loans– A secured loan is one where the customer provides collateral to the lender – for example, for home loans, it is the purchased property, for car loans it is the vehicle, in the case of gold loans, it is the gold that is pledged. However, in the context of a personal loan, the lender does not have any collateral to guarantee his money. Your credit score improves when there is a mix of secured and unsecured loans that are paid off on time and potential lenders are reassured
6. Make sure no more than 30% of income goes to IMEs– Lenders want to assess whether you have enough income from your existing loan obligations to get a new loan. Make sure the EMIs on all your other loans don’t exceed 30% of your income. This does not include your EMI home loan. For example, if your income is Rs 60,000 per month, the total outflow of all your NDEs for non-mortgage loans should not exceed Rs 20,000 per month.
Also, make sure you’ve been with the same job or company for at least six months before applying. Banks want a stable job and a source of income so that you can make all your loan payments on time. With a personal loan, your income is very important as banks have no collateral in case of default. If you change jobs frequently, your application will most likely be rejected.