Personal loans help many people in achieving different financial goals in their lives. In 2020, almost 21 million people had personal loans. This goes on to show how important these loans are for people.
Because they are so widely sought out, there is a lengthy process to secure a personal loan. Many people are not careful in their application process and end up getting their applications rejected.
Here are the top 7 seven tips that will help you in securing your personal loan
- Build and Maintain Your Credit Score
The most important factor to secure a personal loan is the credit score. Your credit score is a direct reflection of your creditworthiness in the past. The time with which you repay your debts and pay your bills has an impact on this score.
Thus, it is important that you’re constantly trying to build your credit score. You can do this by taking proper care of your finances. Pay off all of your existing debts in time. Don’t delay paying your credit card bills.
There are a number of services that help keep track of credit scores. Subscribe to such a service that regularly updates your score and ensures that you keep checking it. This will allow you to make necessary changes to your financial management and get a score that can help you get the loan you want.
- Space Out your Loan Applications
There are scores of loans available in the market- each serving different needs. You can get several rates of interest for your loans too. This makes it enticing for people to apply for several loans in a short duration of time in order to meet all of their financial requirements.
What these people don’t realize is that doing this puts them at a disadvantage with lenders. It creates an impression that you are not managing your finances well and that you won’t be able to repay your loans in time.
Even if your loan applications are not approved, it will still create a disadvantage for you. That is because it’s a crucial part of the information that the lender will receive once you apply for the loan. Try to keep at least a 6-month duration between different loan applications.
- Plan Out Your Loans Thoroughly
Cautious planning is essential for any financial decision that you want to take. A well-thought-out plan is crucial to secure a personal loan as well. Spend some time and carefully analyze the different types of loans that you are eligible for.
Look at their interest rates, and the time periods for repayment based on your capability. Compare all the loans and how each of them meets your personal finance needs. Don’t go for loans that have interest rates higher than you can afford or ones that are not sufficient enough to meet your requirements.
- Don’t Apply for Loan at Multiple Institutions
While it is important to space out your loan applications, you should also remember to not apply for a loan at different institutions. Credit agencies have a centralized system and most of their data is shared and accessible by all of them.
If you apply for a loan at multiple agencies, they would reflect on your documents. It would not bode well for your application as it will give the impression that you are in desperate need of money.
Once this happens and your financial standing comes into question, it will be extremely difficult for you to secure a loan.
- Keep Your Paperwork Up to date
A massive amount of paperwork is required for any personal loan application. People tend to slip up and make mistakes because of the scale of the documents. However, even the smallest of mistakes can ruin your chances of securing the loan.
Any missing document can lead to the process becoming even lengthy and could even result in rejection. The best way to ensure that all of your documents are up to date, you should keep checking them regularly.
This will reduce your burden during submitting them for your application, subsequently, reducing the chances of making a mistake. Proper documents will ensure that you get a loan smoothly.
- Keep Your Debt-to-Income Ratio in Check
Recent circumstances across the world have increased financial instability and made it even more important to keep a tight rein on one’s finances. Keeping your debt-to-income ratio
in check is one of the most important things to remember if you want to get a personal loan.
This ratio is calculated by dividing all your monthly debts by your gross monthly income. The lower this ratio will be, the higher will be your chances of getting a loan.
Generally, it is recommended that you should not spend more than 40% of your monthly income on repaying debts and EMIs. Anything more than that can make it difficult to get a loan. You can keep this ratio in check by reducing your debt and trying to increase your sources of income.
- Never Withhold Any Information
As mentioned earlier, there are a lot of documents that you will have to submit in order to get your loan approved. These documents need to be properly updated. More than that, they need to be 100% true. It is not difficult for lenders to check all of your financial records.
Any piece of information that you intentionally or unintentionally withhold, could not only get your application rejected but even get you blacklisted. This will make it almost impossible for you to get any personal loan in the future.
Give accurate information to the lender even if some of it does not put your finances in a good light.
Over to you…
Getting a personal loan might be a lengthy process but if you follow all the steps clearly, the process will not be as difficult for you. The chances of you securing your loan will be a lot higher if you stick to all of the tips mentioned above.