Personal Loan Checklists To Tick
The need for a personal loan may arise out of the blue or it may be pre-planned, but everyone needs it once in a while. Individuals may take such loan (also called unsecured loan) for many reasons including (but not limited to) wedding expenses or other life events, vacations, medical emergencies, buying consumer durables, home renovation, etc.
Nowadays many alternative lending avenues such as P2P lending platforms are making the process of getting unsecured loans faster at feasible interest rates. However, just like the banks and the NBFCs, even the P2P firms check the credit score of individuals applying for a loan. When an individual applies for a credit, the priority will always be ease of getting loans and the swiftness with which the money is disbursed. Although, almost every agency and bank claims an ease in applying for credit, seldom do any of them disburse the loan amount in a short duration. Even P2P lending companies in which investors fund a borrower’s loan requirement take due diligence before disbursing the requested amount.
So the onus lies on the applicant to furnish all the requisite details for a loan application for faster approval. Here are some tips for the applicants to get their loan approved and disbursed quickly.
Purpose of loan
As mentioned earlier, an unsecured loan can be taken for various reasons:
- To meet expenses for a life event
- To pay medical bills
- To consolidate debt
- To buy consumer durables etc.
Many people also utilize personal loans to fund their small business or startups. So it is very important for the loan applicant to list the purpose beforehand to increase credibility. This is especially true in the case of P2P loans because the investor is always interested in the reason for loan.
Personal loans are unsecured and hence not everyone is eligible for it. An applicant should not be optimistic about loan approval. He or she must check the eligibility criteria beforehand and apply only to those institutes that fulfil their criteria. Some of the common factors checked by the loan agencies and banks include employment status, credit score, age, residency etc.
Credit score check
The first parameter every bank or lender checks is the capability of the applicant to repay the loan. It is always advisable to check one’s credit score before applying for credit. This does not mean that the person with low credit score will not get credit, but if he or she does get one then its interest rate will be high. Nowadays an individual can get their free credit score online. Even in case of P2P lending firms that do not overly rely on credit score, it is always better to be aware of one’s credit standing.
Several banks and agencies advertise with the lowest applicable interest rate for a personal loan. However, based on a person’s credit score (and other parameters) it can go as high as 30-40%. The interest rate is added to the principal amount and included to EMI. It is imperative on the part of a loan applicant to analyse the EMI based on their repayment capacity beforehand.
Banks and NBFCs have many additional (and usually hidden) charges including registration and processing fees on top of the principal amount of the loan. This has to be taken into account before applying for a loan. An informed choice before applying for a loan will help the loan applicant save time by choosing the right lender.
Once an applicant is aware of these time consuming hassles then not only can the overall process of personal loan application be shortened but the chances of an application getting approved is increased.