Personal loans are serviced by individuals and are used for a variety of purposes, from renovating your home to international vacations and debt consolidation. They are generally uninsured, which means they do not have to give a guarantee, making them an attractive option for customers. However, the risk to lenders is higher, and therefore interest rates for personal loans tend to be high. It can also be difficult to get personal loan approval.
Your credit score is an indicator to measure your ability to repay the loan. The higher your credit rating, the greater your chances of being approved. Ideally, you must have a credit score greater than 760 to be easily approved. If you have a lower score, it is better to wait and improve it before going to a bank or NBFC with a personal loan application. You can improve your balance by paying your existing debts, paying all your bills on time, without charging your credit cards, etc.
Do not apply for a loan from multiple lenders in the hope of being approved by at least one of them. It looks like he is desperately seeking credit, giving a bad impression that he needs more than one loan to cover his expenses. If you don’t get approved for these loans, your credit rating will drop, making it very difficult to get approved for any type of loan.
It is best to take a break of at least 6 months between your loan applications. Otherwise, your lender will doubt your ability to repay the loan. If your reason for receiving the personal loan is not urgent, wait a few months before applying to have a better chance of approval.
It is very important that you do your homework and compares the loans before choosing your lender. Even if you choose a lender that specializes in high-risk borrowers because of their low credit rating, you must be careful. Avoid payday and securities loans at all costs. These loans are supposed to keep you in debt at their ridiculously high rates. In fact, you should avoid any offer that seems too good to be true.
Ideally, you shouldn’t spend more than 40% of your income on IME. So if you earn Rs 25,000 a month, you shouldn’t spend more than Rs 10,000 on your NTEs. Your monthly debt divided by your monthly gross income is your debt ratio. You should keep this as low as possible, which means that you will not borrow money unless absolutely necessary. Lenders will not approve loans that you cannot repay anyway.
Finally, finding and applying for a personal loan online can simplify the application process and speed up approval.