Are you thinking of applying for a personal loan to fund an emergency payment? You can get personal loans instantly with reliable providers offering instant personal loans through a completely digital process.
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Wed 25 Dec. 2024
A personal loan can indeed help you make payments for diverse credit needs like funding a family vacation, organizing a wedding, or even renovating your house. In addition to not requiring any collateral, the documentation process is also not as complicated as other types of loans.
What to Consider While Applying for a Personal Loan?
While it might seem simple to avail yourself of the benefits of a personal loan, you still need to consider some important pointers when applying for a personal loan. Here are some points to consider if you wish to get personal loans:
1. Understand Your Credit Scores
Know your credit score before you start counting any number. APRs or Annual Percentage Rates for personal loans can range from as low as 8 percent to all the way up to 35.99 percent in some cases, depending significantly on your credit score. A credit score of 800 or higher will put you in the excellent credit score category. On the other hand, a score of 580 or less will be categorized as a poor credit score.
It can be quite difficult to get a personal loan with a poor credit score. However, you can learn about important ways to check and build your CIBIL score for the overall ease of applying for different types of loans.
As you check your CIBIL score and report with Stashfin, a higher rate will imply getting a lower personal loan rate and a decent loan amount. You are also more likely to be eligible for repayment terms for a longer period.
2. Understand the Numbers
Before you get personal loans, decide the exact amount you need to borrow. This will impact the interest rate you are offered, the monthly payments, and the total amount of origination fees the lender will charge.
Specific personal loan lenders might charge origination fees of more than 10% of the amount borrowed. This cost is typically deducted from the loan funds. As you analyze your loan amount before applying, it can help you avoid reapplying for more to cover the costs later.
Once you have calculated the loan amount, you can do some calculations further with the help of a personal loan calculator. You can try out longer terms to ensure that the payments are lower or shorter terms if you wish to pay off the balance rapidly.
3. Analyze Important Documents and Lender Requirements
With the knowledge of the exact loan amount, you should maintain a record of essential documents to ensure loan approval.
Each lender might have different approval requirements and need different documents to decide whether or not to take the risk.
Some important requirements are:
- Credit Score and Report: Most personal loan lenders require you to have decent credit, but there are options for those with poor or no credit. Your credit history can also be reviewed to observe if there are major issues like judgments or prior bankruptcies.
Other criteria, like your employment history and educational background, can also be considered by the lenders while going through your application.
- Income: Your income depicts how likely you are capable of repaying the loan amount. The more your regular income is, the easier it is for the lender to approve the loan.
- Debt-to-income Ratio: Lenders also consider additional monthly credit payments in comparison to your monthly earnings. This is referred to as the debt-to-income ratio. If the value is too high, you might not be given the loan approval.
- Collateral: While most personal loans tend to be unsecured, some lenders might also offer secured options. Collateral is another term for an asset like jewelry, a car, or some art collection. Rates tend to be lower in the case of secured loans.
Additionally, you are also expected to provide the necessary documentation for loan approval to verify the information provided along with the application. Some documents to get personal loans are:
- Identity Proof: Usually, lenders accept birth certificates, driver’s licenses, certificates of citizenship, or some other important IDs.
- Address Proof: Lenders would like to confirm that you have a verifiable address. Therefore, they might ask for rental or lease agreements, utility bills, credit card statements, or property tax bills as proof of address.
- Income Verification: You can provide bank statements or tax returns if you are self-employed.
Most lenders like Stashfin feature reliable apps or websites where you can upload relevant documents.
4. Look for the Best Personal Loan Rates
Search around and apply with lenders that clearly specify financial and personal loan requirements that cater to your needs. Compare different lenders and loan types to obtain an idea of what you qualify for. Do not settle for the first offer you receive.
If you are a long-time account holder with your bank, understand whether or not it is willing to offer you a better rate.
Checking for Prequalification Options Ahead of Time
Most personal loan lenders allow you to go through the predicted interest rates before you officially apply through the process known as “pre-qualification.”
This process does not require a difficult credit inquiry, limiting the overall negative impact on your credit. If you are not able to pre-qualify and the website does not feature minimum eligibility criteria, you can consider contacting the lender directly to access information before you apply for the personal loan.
Conclusion
Getting approval for a personal loan is a simple process. When you execute important steps beforehand, you can enhance your chances of loan approval.
Even simple steps like understanding specific lender requirements and running through your credit score can decide your loan approval process.
Take ample time to research and compare lenders to come across the best rates for your specific financial situation.
