Ways to Increase Your Chances of Getting a Personal Loan
Before you know how you can increase your chances of getting a personal loan, it’s far more important for you to know what personal loan is.
What is Personal Loan?
A personal loan is an unsecured loan that is availed by individuals and can be used in many ways, such as:
- Going on an international vacation
- Renovating your house
- For debt consolidation
A personal loan is one of the most popular types of loan as it doesn’t require an asset to be offered as a security for the lender. However, the risk for money lenders is high due to lack of collateral. Therefore, personal loan interest rates are slightly higher. Though, a lot depends on the credit score of the borrower. So, make sure to improve your credit score before applying for a new loan.
If you apply for a personal loan, you might get difficulty in its approval, but you can use the following tips to increase your chances of getting a personal loan:
1. A Good Credit Score
Credit Score is given to an individual based on their debt to credit ratio and is calculated with the help of previous loan repayment figures and credit payment. Higher credit score means more regularity in your credit bill payments. There are several ways to improve credit score .The credit score ranges from 350 to 900.
- If your credit score is above 700
You have a higher chance of getting your loan approved.
- If your credit score is on the lower side
In this condition, you can improve your credit score by taking a few months to complete your bill payments and dues and then apply for a personal loan.
2. Don’t Send in Multiple Applications
There is a myth where people think that if they will apply to more banks for their personal loan, their chances of getting the loan increases. But this is just a myth as exactly opposite happens; it decreases your chances of getting a personal loan as banks do not prefer the applicant applying to many banks since it dilutes the possibility of the applicant choosing that specific bank.
3. Choose Loan Amount Reasonably
You should always apply for a reasonable loan amount that you are capable enough to repay your respective money lender. Based on your current salary, every bank checks your loan repayment capability and then only decides to give your personal loan or not. If your expected savings are way less than the personal loan amount you have applied for, the bank may reject your application.
4. Don’t Apply for Personal Loan While Paying Off another Loan
Make sure that you haven’t taken any loan in the last six months before applying for a new personal loan. Banks generally avoid lending money to such applicants, as they consider these applicants might not be able to take the burden of two loans at a time.
5. Choose your lender carefully
Remember that you will be re-paying the loan for some time after borrowing. Therefore, it is important that you choose a lender with an eye on future conditions. Often borrowers experience good financial growth and want to repay the personal loan. However, often lenders place limits to when you can start pre-payment or charge you for prepaying the loan.
The good thing is not all the lenders will charge you for prepayment. Lenders like Axis Bank allow pre-payment of personal loan without charging extra. Also, it is easier to apply and manage loans with lenders who provide online services.
Follow above-mentioned methods, and your personal loan will surely get approved, and you’ll be able to fulfil your dream.
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