Personal loan is one of the quickest ways in which a person can get a quick fund. People opt for a personal loan for various reasons. The issues can be as far ranging as home renovation or starting a new business. A person can take a personal loan to pay for an emergency medical bill while another might take it for an exotic holiday. However, in all the cases what matters most is personal loan instant approval.
There are primary factors that are to be kept into consideration while securing a personal loan.
Following the Eligibility Criteria
A personal loan is different from a car loan or even mortgage because it is not secured by any collateral. This is the primary reason why the eligibility criteria for a personal loan are more stringent. Banks go through the borrower’s background in detail before approving a personal loan. This includes their credit score, repayment history and income. These data along with other similar information is clearly evaluated before a personal loan is approved. Since it is an unsecured loan, banks do not make assessment of the collaterals like in the case of a secured loan. This is why personal loans are often taken for both consumptions and productive use.
Assessing Your Credit Profile
A borrower’s credit score plays an important role in securing a personal loan from the lender. The higher the credit score the better it is for the applicant in terms of securing the loan. The score reflects the applicant’s credit behaviour and is sourced from credit information companies. You can maintain a good credit score by always paying your credit card bills and other loan payments on time.
A high credit score is helpful because it helps you bargain for the best rate of interest and thus pay a reduced EMI i.e. Equated Monthly Instalment. Multiple applications for a loan also bring down the credit score. It is best to do some research on which bank is offering the best deal and where there is a higher chance of getting the loan approved. This is more effective than applying at multiple banks and hoping one would be approved. Another factor that needs to be kept in mind is that the EMIs do not go beyond 40% of the net income. The debt burden should be low to increase the chances of a personal loan getting approved. This means that the borrower’s income should be sufficient after paying off already existing loans.
Banks are keen on checking repayment capacity of the borrower before everything else. The first part of application is allowing the bank to evaluate the repayment history of the borrower along with any other existing loans. By reviewing the borrower’s income the bank will calculate the debt service coverage ratio. Many banks set it at 1.20 for sanctioning a personal loan.
Must Be Currently Employed
When it comes to salaried person, their occupation plays a role in getting a personal loan approved. While ideally banks treat all applicants equally and make no discrimination between private and government employees. The situation can be a bit tricky in real life. The situation gets trickier if the company has a poor record of paying salaries or if the person has switched jobs frequently. On the other hand government employees and PSU employees are often given preferences when it comes to getting personal loan. People working in blue chip companies and other stable professions like doctors, lawyers and engineers are given preferences. For all salaried applicants, employment history is considered as proof of income and stability.
Apart from these important factors, a person must be 21 years of age and have must provide a valid set of documents like ID proof, residence proof and other documents to apply for the personal loan. Once the loan gets approved, the borrower is supposed to pay off the loan in Equated Monthly Instalments. The amount is predefined when the loan gets approved along with the tenure for which the EMIs have to be paid. There are personal loan EMI calculators available online that helps in calculating the total amount that the borrower has to pay including the compound interest levied on the principal. The personal loan calculators can be a great help in calculating the monthly payments and compare the different options available.
If a borrower is looking for personal loan instant approval it is best to apply at a bank with which they already have a relationship. The Know Your Customer process gets easier and faster if the borrower already has a salaried account or a home loan at the same bank. This however does not mean that you should not do your research and grab the best offers that are available even if that means using a different bank that you currently use. As a borrower, you must carefully consider the personal loan interest rates, processing charges and penalty for prepayments or foreclosure.
If you are looking for an instant loan, you need an easy yet informative guide. Discover how to be successful on qualifying for a personal loan here.