Personal Loans - Frequently Asked Questions

Getting a Personal Loan can be quite a confusing experience. It is entirely natural that a hundred questions cruise your mind. However, the important part is to get the right answers for them.

mymoneykarma brings to you some of the most frequently asked questions regarding personal loans, along with apt and extensive solutions. Certainly give them a look before you go ahead with your personal loan application.

How to Improve your Odds of Getting a Personal Loan?

Getting a personal loan is not always easy, at least not as easy as the ads and websites want to tell you. It is still tough because loans are limited while the people coming for them are too many. What you need to do in such a situation is to stand out. 

Here are the steps to do just that!

• Clean up your credit: One of the top criteria for any loan is to have a good credit score. Do, is your credit score up to that mark? Each bank and most NBFC have specific credit score level criteria. In case your credit score is not there yet, don’t worry. There are many ways to increase the score. You should also check your credit report for any errors. If you find any, report those immediately to the concerned credit bureau.

• Balance up your debts and income: All lenders, regardless of banks and NBFCs, will ask for your income level. You may not be able to increase your income immediately for getting a loan, but you can still bring down your debts and liabilities, and that goes a long way! Consider paying off your debts first before taking a new loan. Think about selling off stocks and of taking a part-time job. These will increase your annual income, your debt-to-income ratio, and by extension your chances of getting a personal loan.

• Consider having Guarantors/Co-signers: Some personal loans actually require you to have the support of Guarantors and Co-signers, especially if you have never taken loans before or if you are a student. In any case, the person you should choose for this needs to be one with a good credit score like 750.

• Borrow less: A thumb rule when it comes to money is never to borrow more than what you can pay back. In other words, “don’t bite more than you can chew”.

• Choose the ideal lender: Not all lenders have the same requirements. Some may have easier requirements while others may have more stringent ones. Pick the one whose criteria is met by you. By the way, don’t apply with multiple lenders at the same time. They will all inquire
  into your credit score, which brings it down.

How to get a Personal Loan when you have a Bad Credit?

Let’s get one thing straight. Bad credit score and loans do not go hand in hand. That’s like the proverbial fork in the road, or even a dead end if you will.

Lenders take a risk when they give away loans. What if their borrowers default? Then they may never get back their money, unless of course there’s a security. In case of personal loans, since they are unsecured loans, the risk is greater. That’s why more emphasis is given on your credit score. It needs to be of a sufficient level before anyone will give you loans, especially personal loans.

However, it is not impossible to get personal loans in case your credit score is low. There are still some things you can do to prove that.

• Prove that your income is enough to support EMI payment: This is one of the most important steps you can take. A lender may just accept to give you a loan if you have a steady job with a salary to guarantee you’ll pay back the loan. However, you may still have to pay a higher interest.
   

• Consider a lower personal loan amount: Can you do with a small loan amount? If you can, consider that seriously because without most lenders may not consider your case if you have a low credit score. However, they can if you need only a small loan that is of less risk to them.
   

• Take the help of a guarantor or a co-applicant: Doing this makes the likelihood of getting the loan higher. That’s because in case you can’t give back the loan, your guarantor will have to.
   

• Tidy up your credit report: Your credit score is low because it's in a mess. Consider taking time off to clean it. If none of the above steps work for you, this one will even though it’ll take much more time.

How can you get a personal loan without any documents?

Lenders need to see your documents for verification purposes. In fact, some loans depend on your credentials and various other factors like your location. For instance, you can get lower EMIs for some loans if you live in specific areas, like non-metro areas. But for that you do need to show your address proof.

However, if you can’t furnish your documents at all, don’t worry yet. It’s not the end of the world. Loan application paperwork is minimized thanks to the advent of Fintech. You can get your loans sanctioned with a minimum of paperwork. Besides, it can all be done online, and you can get your loan sanctioned in a matter of minutes!

Here’s what you need to do in such situations:

• Choose a lender you know well: If you have already taken loans from a lender before, it’s a good idea to take from them again. They know your trustworthiness already, and may already have all your documents. This can be one of the best ways to get a personal loan without documents.

• Have a high credit score: Few lenders will turn you away if you have a high credit score. Having a high credit score means that you are trustworthy with credits. Banks and other lenders may just yet overlook your lack of documents and sanction the credit.

• Take loans with instant approval feature: Many NBFCs and even some banks offer this facility, by which you can get your loan sanctioned with minimal documentation. Indeed, in as few as 5 minutes you can get credit deposited in your account.

• Get a pre-approved offer: Pre-approved offers give you the ultimate experience of document-free loans. Search online which loan is pre-approved based on your profile. Select one, and it’s done!

How to avoid rejection?

By now, you have seen that there are eligibility criteria for all personal loans. So, you only get rejected if you are not fulfilling this criteria. In other words, you must make sure that you are fulfilling them before you apply. Take time to study and check the criteria. After all, it does not make sense in applying out of the blue, and then seeing your application rejected, right? By the way, a loan application rejection affects your score negatively, and brings it down. Too many rejections back to back can make your score plummet perilously.

Criteria differs from one lender to another, but there are several common criteria such as income range, age, credit score, nature and status of employment, current loans, and so on.

So before you apply, make sure that you are meeting these criteria. Double check if you have to.

How to check my personal loan status?

There are two ways to do this. Most lenders give you two ways to check your loan application status.

1. Online: One of the easiest things you can do is to use the lender’s online portal. All banks and NBFCs have websites. When you make an application directly, they give you a reference number and an application number. In case you apply through a third-party site, you get to log in on the third-party site to see your application status.

2. Offline: If you do not want to use the online way, or cannot, there is another way. For this, you need to visit their branch office to check the application status. Alternatively, you can just talk to them over the phone to check. Every lender has a general customer care number.

How to get my Personal Loan Statement? 

Getting your personal loan statement is the same as checking your loan application status. You can get your personal loans statement by both offline and online means. To check online, you have to use your application and reference number, and the information will be sent to your registered email ID. In the offline way, you can visit the lender’s branch yourself or use phone banking.

What to do after closing the Personal Loan?

Have you recently repaid back or have foreclosed the loan? If you have, you may be thinking that your obligations are over. However, that’s not how it works. Without having certain documents, you won’t be able to prove that you have repaid back the loan. Here are the documents you should get.

1. NDC or No Dues Certificate: This is the most important document you should get. An NDC tells you that you have repaid the debt or the loan. So get this immediately after you have paid off the loan. It’s also a good idea to keep this document for an extended time as you may need it from time to time. Without an NDC, you can’t prove your repayment. If you are looking to take another loan in the future, you need to show the NDC to prove that you have finished paying off the previous loan, or that you do not have any standing loan obligations. Usually, lenders give this document immediately after repayment of the last installment in hard cash. In case you are paying by other means, the lender will send it either to your registered address or to your nearest branch office.
    

2. SoA or Statement of Account: This is another important document you should get. It proves you have repaid the loan on time. Understand however is that this document is given optionally and only by some lenders. Others may not give it at all. But if they do, consider taking it. In case you find some problems in your credit score, such as discrepancies, you can use the SoA to make changes in it.
    

3. Collect unused cheques: This may not seem like much, but it aids in showing that you have paid off the loan. Unused cheque leaves mark the end of the loan closure process.
    

4. Check your credit score: After the loan is closed and all the other steps above are taken, it is a good idea to check your credit score. Check the score to ensure there’s no difference in it after the loan closure. This step is important if you are thinking of taking a loan 1 or two years later after the current loan closure.