Applying For A Personal Loan For The First Time? Here's How To Choose Wisely.
Posted on: 19 June 2019 by Kelly Wilson
The first-time borrower, your demonstrated financial credibility is paramount when it comes to getting approved, and while selecting a loan, you’ll want to consider other crucial factors before you select an option. Below, we’ll discuss how you should go about applying for a loan and choosing the best option available.
While applying for your first loan, you want to ensure that you have a strong chance of getting your loan application approved. With all the options available, it’s easy to simply zero in on the lender that offers you the lowest interest rate on your loan.
However, a lower interest rate doesn’t mean you’re getting the best deal on the market. As a first-time borrower, your demonstrated financial credibility is paramount when it comes to getting approved, and while selecting a loan, you’ll want to consider other crucial factors before you select an option. Below, we’ll discuss how you should go about applying for a loan and choosing the best option available.
Every bank and lender has an eligibility criteria that determines whether a potential applicant can qualify to apply for a loan. These parameters include income, age, credit score, employment history, and location.
All lenders have a different set of eligibility criteria that a potential borrower must meet, and these are hard parameters. Since unsecured loans come without any collateral for the lender to hold onto as security, the approval process for applicants is a little more stringent to deter defaulters.
For applicants who meet the eligibility criteria, lenders will review the applicant’s CIBIL score and financial details to ascertain whether the applicant has the capacity to repay the loan they’ve applied for.
You can discover your eligibility by using our personal loan eligibility calculator.
Using a personal loan eligibility calculator is an easy way to check whether you meet a lender’s criteria, and it will also give you an estimate of the loan amount you can avail.
How to Choose a Personal Loan
Once you start searching for a lender, make sure to narrow down on those whose eligibility criteria you meet, in order to avoid rejection simply on the basis of ineligibility. You should also apply to only 2-3 lenders in a month’s time. As inquiries for personal loans get recorded in your credit history, applying to for numerous loans at once will give lenders the impression that you are credit-hungry, and thus, will reduce your chances of approval.
As mentioned earlier, many people think the best type of loan to select is the one with the lowest interest rate. The reason why is because as a first-time borrower, it’s critical to demonstrate the ability to pay off your monthly EMIs with ease since this has a direct impact on your credit score- which will determine your eligibility for taking loans in the future.
Taking a loan with a longer tenure works in your favour. For example, if you take a loan of Rs 1 lakh at an annual interest rate of 18% and 24 months tenure, you’re monthly EMI will only be Rs 4,992. With the same amount and interest rate, the EMI becomes Rs 9,168 if taken for a tenure of 12 months. This is a staggering 83% increase, and will significantly burden your monthly budget.
Another critical factor to keep in mind is to have all the requested documents and details in proper order. When an applicant has provided incorrect or missing details on their application form, including requested documents, this leads to an automatic rejection of their application. Be meticulous in ensuring that your form has been filled correctly, will all the details and documents uploaded in the correct place. This also makes the reviewer’s job easier, thus, giving you a far quicker approval time.
Taking a personal loan for the first time is an excellent opportunity to improve your financial situation, and your credit score. Target your approach by choosing a lender whose eligibility criteria you meet by using the personal loan eligibility calculator, and select a loan that provides a longer repayment tenure.