A financial crisis is something most of us go through at least once during our lifetime, unless of course, we have a never-ending supply of money. And since most of us don’t have such resources, tough financial situations are sometimes the most difficult to handle.
They can cause you a lot of stress and anxiety. But, if you ever face such a situation, don’t worry too much about it. There is one way you can get some money to help you get through this difficult time.
Enter, personal loans. This is an unsecured loan that you can take when the going gets tough financially. Lenders offer this loan based on your credit profile, income, and certain other criteria.
So, you don’t have to put up any form of collateral to get the money. And the best part is that you can use it for any purpose you feel fit. As long as it’s legal, of course.
So, if this is something you think you’re likely to apply for in the coming days, take a look at how you can get one without any hassle.
This article will take you through 5 steps that can help you get the loan you’re looking for. Read on to find out more.
Step no.1 – Find out what your requirements are
The first step is to accurately calculate what your requirements are. In other words, find out exactly how much money you need. For this, you’ll have to take an account of what your current financial situation is.
Assess your need. Calculate how much it’s going to cost you. Then see how much of your own money you can put in. The rest can be taken as a loan.
When you apply for a personal loan, however, make sure you only apply for an amount that you can easily repay every month. Banks will offer you a loan based on your income. So, even if you’re eligible for a larger loan, apply only for the amount you need right now.
If your EMIs are too high, you may find it difficult to pay them every month. That’s something you definitely want to avoid, especially since improper repayment of loans can hurt your credit score.
Step no.2 – Use your credit score to check your loan eligibility
Once you’ve figured out how much money you want to take as a loan, the next step is to check whether you’re eligible to get that amount or not. You can do this by checking the eligibility for various loans.
Your credit score is one of the important criteria that determine your eligibility for a personal loan. What is a credit score? It is the rating given by credit rating companies like CIBIL based on how you handle your finances and use the credit you have.
It depends on whether or not you’re repaying your current loans on time, paying off credit card bills on time, how much of your available credit you use each month, etc.
Most lenders require you to have a good credit score if you expect them to sanction you a loan. A rating of 750 and above is considered to be a good score. If you don’t have a good score, the chances of your loan application being rejected are more.
This is because your credit history also shows your risk level. A good score indicates that you’re responsible with your finances and borrowings, and hence your risk is low. A bad score indicates unhealthy financial practices, and therefore, increases your risk level.
You can check your score by using an online credit score checking tool or app.
There are a few other factors that influence your loan eligibility as well. These may change from lender to lender. The following are a few examples of what lenders are looking for:
- Age – between 21 years and 65 years
- Monthly income
- Type of residence
- Existing debt-to-income ratio
- Area/city of residence
- Type of employment
- Organisation in which you are employed
Keep in mind that all these may vary depending on the lender you want to take the loan from.
Step no.3 – Compare the interest rates of various loans
Once you’ve established the various loans you are eligible for, you should then check out the interest rates of the various loan options available to you.
Don’t apply for a loan simply because it’s the first option you see on your screen when you search online. The interest rate of your loan matters a lot. It determines how much your borrowing is going to cost you in the long run.
So, taking a little time to compare various loan offers can help you find the option with the lowest interest rate. This can end up saving you a lot of money if you do your research well.
Evaluate all the options in front of you. Check out the loan tenures offered as well. Find out which EMI suits you the best.
Try negotiating with a lender to see if you can get a lower rate of interest. If you already have a savings bank account with a lender, see if you can get a loan from them. Having a good, existing relationship with a lender can get you better loan terms.
While comparing options, also make sure that you look at other fees and charges charged by each lender. Look at the processing fees, documentation charges, and other fees. These also add to the cost of your loan.
See if lenders are offering special interest rates and loan terms during festival seasons as well.
Step no.4 – Contact the lender for more information
This is something some borrowers don’t do properly. Once you’ve decided on a loan, contact the bank even if you’re applying online. Get to know about the loan offer in detail. Visiting your lender or getting a representative to come and meet you can help you understand everything clearly.
Go through your offer documents thoroughly and make sure you understand all the terms and conditions mentioned in them. If there’s something you don’t understand, especially a particular charge, make sure you ask the lender about it.
Talking to the lender may also help iron out differences in the online information and the latest offers from the lender.
If you want to negotiate with the bank regarding interest rates of other loan terms, this might be the best time to do it.
Step no.5 – Submit your documents
After you’ve gone through the steps given above, the final step is to submit your loan application. Along with the loan application, there are a few other documents you have to submit. These may differ from one lender to another.
Some of the documents that lenders usually ask for include:
- Proof of age
- Proof of address (Aadhaar card, rental agreement, passport, driver’s licence, etc.)
- Proof of identification (PAN card, Aadhaar card, passport, etc.)
- Proof of income (salary slips, bank statements, income tax returns)
Keep in mind that submitting the required documents is mandatory. If you don’t give the lender copies of all the documents they need, they will most likely reject your application.
Before you submit your application, check it a few times. Make sure that all the information you’ve provided is correct. Providing incorrect information or incomplete information can lead to application rejection.
Following these five steps should help you get the loan you need. Keep in mind that you borrow only an amount that you can afford to repay. Choose your interest rates and tenure wisely. Take time to evaluate your options. And most importantly, remember to pay your EMIs on time, without defaulting.