Financial problems are met by everyone, one or the other time. This may be for a sudden plan of vacation, buying new furniture or some health problem. One way to solve this financial issue is getting a personal loan.
So what is this personal loan? It is a type of unsecured loan which a bank provides. Simply putting, it is a loan without any security. Now, why would a bank give you the money without any surety of getting it back? Well, there is no cent percent surety but they can get the confidence by an applicant's financial track record.
The personal loans are difficult to be accepted so an applicant should leave no stone unturned when applying for a personal loan as far as it is legal. One can take a few steps to improve the chances of getting a personal loan.
- Avoid applying for multiple loans: Personal loans are one of the costliest types of credit available in the market. So repaying a single loan is a big task in itself. And if a person applies for multiple personal loans the chances of getting rejected by a bank is quite high. The banks don't feel safe to give credit to someone who already has an outstanding loan amount at such high-interest rates.
- Borrow a realistic amount The amount of loan should be decided by subtracting the monthly expenses from monthly income i.e. the monthly savings. So the every month installment should be 30%-45% of the monthly savings. The personal loan helps a lot but this help comes at a high cost. So, one should always apply for the amount which is really needed.
- Borrow for a short tenure The amount borrowed through a personal loan should be repaid as soon as possible. The shorter the period of repayment, low will be the total amount of money paid to the bank as interest though the EMI (every month installment) will be big. If the repayment period is longer it will be easier to pay EMIs but the total amount of money to be paid is high. So a good amount of thought should be given to this matter.
- Check the credit score One must apply for the credit score to know the chances of getting approved when applying for any type of loan. In India, the credit score is provided by CIBIL, Credit Information Bureau (India) Limited. This score is known as CIBIL score. The CIBIL score should be as high as possible in order to be approved for the loan. This will give a really good idea about the chance of getting approved.
- Read the fine print One should always read all the papers related to the loan. All the documents should be read thoroughly with complete understanding. And if you don't understand something, ask about it. Finally please don't sign any document without reading and understanding the terms and conditions
It is a matter of your hard earned money so you should be the one taking care of it. Good luck for your loan application.