Factors To Be Considered When Applying For A Personal Loan
Individuals avail of a Personal loan to concur with their financial requirements. This type of loan comes in handy if the individual has any unexpected financial expenses to take care of at some point. The loan takes from a bank or a non-banking financial institution (NBFI). It is also possible to find a Personal Loan App on the internet, which provides loans with just a few clicks. There are predetermined interest rates and terms and conditions associated with personal loans.
Here are a few benefits of personal loans
- Many personal loans are unsecured loans that don’t require individuals to pledge any asset as collateral.
- Personal loans give to the borrower based on credit score and financial history.
- When you use other types of loans, you can only use the funds for a particular purchase, like a home loan or a car loan, in which you purchase a house or a car. However, when you take out personal loans, you can use the funds for various purposes. Based on your convenience, loan tenure can range from 12 months to 60 months.
- Less paperwork, only documents that are needed are identity proof, and the income statement is enough to apply for a personal loan.
- Loans Online can be much quicker. Once your loan is approved, The amount directly gets transferred into your bank account.
- The loan amount depends on many factors, such as repayment capacity, income statement and many other factors.
Before approving a personal loan, banks consider the following factors:
- CS (Score of credit):
It is a triple-digit number representing individual creditworthiness to the bank. It describes how you have managed your bills and debt in the past. In general, the lower your credit score, the lower your chances of getting a great deal.
There are higher chances of getting your application rejected if you have a lower credit score. So to avail yourself of your opportunities of getting a loan, it is crucial to keep track of your credit score. You can improve it before applying for a loan if it is lower.
- Income statement:
Your monthly income becomes vital since a personal loan is an unsecured loan. In addition, the income requirements vary based on the location you are living.
Your current liabilities play an essential part in getting a loan application approval. For example, if you already have huge credit card bills, EMIs, car loans and other debts, and if you have applied for a personal loan, the lender will analyse your debt to income ratio and decide on the loan application.
If your debt to income ratio is not perfect, your monthly income may go towards the loan repayments, which may not leave you enough money for your day to day expenses.
The applicant’s age plays a crucial role in the approval of the loan. In addition, lenders ensure that the borrower has enough time to repay the loan by checking the repayment period.