5 Things to Consider Before Applying for a Personal Loan

A personal loan may serve as a saviour during various financial situations and challenges of life. However, to make sure your loan is approved in one shot, you need to have all the required pertinent information regarding the same. Having complete knowledge of its prerequisites would also help you fetch lower personal loan interest rates for your secured personal loan application.
In the last two decades, there has been a steep rise in personal loan apply  for more reasons than one. It initiates easy and quick dispersal of funds with minimum documentation and no collateral required for the same. Also, there is no restriction on how the applicant uses the funds acquired from such loans.
However, to ensure that your loan application is honoured and accepted in the first attempt, certain important points should be checked. Make sure to keep these in mind before putting in your application papers for the same.

Check your credit score

While evaluating a loan application for personal use, lenders factor in the applicant’s credit score as the most important parameter to judge their creditworthiness. Maintaining a high credit score can work in your favour while a low one can stand against your loan requirement. However, to ensure a good Cibil score, all you need to do is make your credit card bills and EMI loans on time and curtail your credit card usage to 20%-30% of the total limit. Remember, a bad credit score might not only reject your application, but it might also initiate a higher interest rate to be applied to your loan amount.

Compare between various loan offers available in the market

It is important to check and compare offers from multiple lenders on this forum to ensure you get your hands on the lowest rates of interest on your loan amount. The personal loan interest rates vary from anything between 10.99% to 26% p.a. Hence, considering your eligibility and suitability, comparing the various online market forums would make sure you get the maximum benefit in terms of interest rate on your loan.

Choose a loan tenure as per your repayment capacity

Lenders assess the FOIR (Fixed Obligation to Income Ratio) of an applicant before approving his loan application for a personal loan. Having checked what proportion of your present income is being used in repaying debts and loans, including your credit card bills and the present new loan amount in consideration, accordingly lenders evaluate the amount to be lent and the interest to be charged. An applicant whose FOIR is within 40%-50% of his total income is the one who generally gets the advantage of a higher loan amount with minimum interest levied. Hence, ensure your FOIR remains within the required range to get the maximum out of your loan.

Do not submit a loan application to multiple lenders

In lieu of evaluating your creditworthiness and repayment schedule, a lender always gets hold of your credit report from the credit bureau whenever you apply for a loan or a credit card. These credit report requests, initiated by the lenders from the credit bureau, tend to bring down your credit score points every time a company seeks for it. Also, too many loan applications in multiple companies would create a negative image of you as being credit hungry. This could even lead to rejection of your loan application.

Avoid switching jobs too often

Your employment history and stability play a pivotal role in building up your image in the eyes of the lending companies. A frequent job change would indicate an unstable career which in turn would decline your request for a personal loan.

Final Thoughts

Personal loan for self-employed people are like a boon for meeting personal and domestic unforeseen expenses like children’s marriage, their education or even medical expenses. However, when availing for a personal loan, one should be extremely cautious. There is a risk of falling prey to lenders who are not transparent and may allure you with gimmick plans and offers. Also, check the personal loan rates of different financial institutions offering. Remember, your safety is in your hands, and you need to be extra cautious when it comes to taking a loan for personal usage. In the end, it is you who would be bearing the brunt of repaying it back with interest.
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