Getting Approved For A Personal Loan
If you need money to take a vacation, fund your wedding, or just to meet your basic expenses, then you would probably have considered getting a personal loan. A personal loan is the one where you do not have to place any collateral, like your car or house, which the lender can take back, if you are unable to make payments on your loan.
However, the major drawback of a personal loan is that it is offered at higher interest rates as compared to other types of loans, such as auto loans, home loans, etc., where you have to put a security. This is because the lender does not have any guarantee for the loan save for your reputation.
Personal loans can help you save a considerable amount of money as opposed to pawnshops, overdrafts, and payday loans. But, this is only possible when you use your personal loan correctly. Nevertheless, personal loans also have their own pitfalls, such as dishonest lenders who can force you with high interest rates and fees.
Follow these 3 ways to get approved for your personal loan and to get better terms for your personal loan.
1. Determine your personal loan type
The first and foremost thing for you is to decide what type of personal loan you require. Generally people think that personal loans are closed-end and unsecured installment loans. However, they do not know that auto loans, payday loans, credit cards, and mortgages, are all types of personal loans and not business loans.
Therefore, it is important that you understand the loan type for which you are applying. A lender may offer you a secured loan, if they see that you cannot qualify for a loan or if your CIBIL score is not good to get prime rates of interest.
Furthermore, if you are ready to put your home or vehicle as collateral, then you may get better interest rates, along with a home equity loan, mortgage, or a title loan. Though, these types of loans are secured personal loans and can even result in loss of your property in case you default.
2. Check your CIBIL score
You must not apply for loans for which you know you will not qualify. This is because every time when you apply for loan or a credit card, it is reported to the credit bureau and shown on your credit report, which in turn lowers your credit score.
Moreover, if your credit or loan application gets rejected, the damage to your credit score is even greater. Additionally, you have to report your rejected credit application whenever you try to obtain credit in future, which in turn can result in the rejection of your future loan application when the loan officer sees your past record of rejected credit application.
Therefore, it is recommended that you check your CIBIL score by requesting a free credit report at least once a year. This way you can ensure that there are no inaccurate or false statements on your credit report.
You can also request for your free CIBIL score from a trustworthy online credit reporting agency. When you know about your credit score, you can confidently ask your credit lender about the guidelines that they follow to assess loan applications. Then, only apply for the loan.
3. Improve your CIBIL score
The next step is to improve your credit score before applying for a personal loan. A credit score above 700 is considered excellent and one that is below 300 is considered poor. So, try to boost your CIBIL score, so that you have more chances of getting your loan application approved and thus save money through lower rates of interest on your personal loan. You can raise your credit score by making your payments on time and reducing your debt-to credit ratio.
By following these 3 tips, you can certainly get approved for a personal loan. Do not forget to shop around and compare different personal loan offers from different lending institutions, so that you can get the best payment and lowest interest rates on your personal loan.