5 Things to Consider Before Applying for Personal Loan Online
The ease of availing of personal loans often leads borrowers into overlooking some of the important aspects it. To ensure your loan application isn’t rejected here are the 5 things to consider:
Check your credit score:
A credit score is one of the most important parameters when a lender is evaluating your loan application. A high score can boost your loan approval chances. So you need to regularly pay your loan EMI’s, and credit card bills, containing your credit utilization within a 20% to 30% ratio, and monitor any co-signed loan accounts for maintaining a high credit score.
CASHe believes that a large number of users can’t access traditional loans because they either don’t have a credit history or they don’t have a good credit history. Traditional financial institutes provide loans to those who have a score of more than 750. There are a lot of people who are below that score, but that doesn’t mean they are bad borrowers or users. This is the gap that CASHe wants to fill.
Compare various loan offers:
Almost all banks and lending institutions offer personal loans with interest rates between 10.99% and 26% p.a. It is important to choose the lender that matches your loan requirements. Consider visiting online financial marketplaces to avail the best loan offer as per your requirement and eligibility, or check for a personal loan through the app.
Choose loan tenure according to your repayment capacity:
Lenders assess your repayment capacity by computing your Fixed Obligation to Income Ratio (FOIR), This is the proportion of your income being utilized in debt repayments, including credit card bills and loan EMIs. Lenders generally prefer lending to borrowers having FOIR of up to 40-50% (including EMI of new loan), ensure you opt for loan tenure whose corresponding EMI keeps your FOIR within its range. Borrowers whose repayment capacity is low should consider opting for longer loan tenure but longer tenure also means higher overall interest payment. To reduce interest amount, prepay your loan whenever you have any surplus funds. But overall savings should significantly outweigh foreclosure charges if any.
Avoid submitting a loan application to multiple lenders:
Whenever you apply for a loan or credit card, the lender gets your credit report from the credit bureau, to evaluate your history and creditworthiness. Such credit report requests are treated as hard inquiries by the bureau and each inquiry pulls down your credit score by a few points. Multiple inquiries within a short span can depict you as credit hungry which leads to many lenders rejecting your personal loan application. To avoid this visit online financial marketplaces to compare and choose the most suitable loan offer available.
Refrain from frequent job switches:
Your employment history and stability is a crucial factors used by lenders when evaluating your loan application. Frequent job-hopping is considered a sign of an unstable career and lenders may hesitate in lending to such applicants. Avoid frequent job changes if you’re planning to take a personal loan online.