Whether it’s to bridge a financial gap or you require funds to help resolve a particular situation, a personal loan is definitely the right way to go. On top of that, in today’s time, it is quite easy to apply and get approval for the same. But, are you aware of the factors that affect your chances of getting an unsecured loan? An unsecured loan usually costs more than secured loans and can often result in rejection of applications. However, there are a few things you could do to increase your chances of getting an unsecured loan.
Boost Your Credit Score
If you know in advance that you will need an unsecured loan in the distant or near future, then it’s advisable that you take the time to focus on and improve your credit score rating. You could do this by paying off all your old credit card balances and debts. Do not open any new credit card account before applying for the loan. Check your credit history and if you’ve noticed any errors, then contact the credit bureaus to fix the mistakes. Remember, any incorrect entry in your credit report could cost you a big deal. If you have a bad credit score, it will be extremely hard for you to qualify for a loan with good terms. Please note, your credit score will fall slightly by a few points when applying for an unsecured loan. This is primarily because the lender will extract your credit score as a part of the loan approval process which, translates to something called as a “Hard Inquiry”.
Use a Co-Signer
Use a co-signer who trusts and knows you to co-sign your loan. However, the person you take on to be a co-signer should have sufficient money or income including a good credit rating in order to repay your loan in case you unable to.
Convey Your Repayment Plan
Your loan application will be more likely to be accepted if you provide proper documentation and a written budget showing your commitment and ability to repay the loan. If your loan requires you to make monthly repayments, then it would be good to show that you can make those payments without any financial difficulty. Also, showing a great work record without any long periods of unemployment would give the loan officer a positive impression.
Avoid Loans with Unfavourable Terms
As far as possible, try to avoid taking unsecured loans that have high fees/charges. Some lenders also impose a penalty if you want to pay off the loan earlier than the set / designated tenure. On the other hand, others would have significantly high application fees or charge continuous interest on your unpaid balances. In such cases, it is advisable that you avoid applying for such loans with unfavourable terms and conditions.
Some banks would also want an account from where they can electronically draft your monthly payments. Though this isn’t bad at all, it could save you some money. But make sure that your account has overdraft protection so that you wouldn’t be charged any additional fees in case your balance goes below the payment amount.
Borrow from a Credit Union
You must first get a membership from a credit union before you apply for a loan. Credit Unions are non-profit institutions that are easy to find. The requirements to join one are job-related, geographic or your affiliation with a group. Credit Unions would usually charge less for an unsecured personal loan than banks would since it’s a non-profit institution.
See what’s available in the market
When looking to find the right unsecured loan for your requirement, it is advisable that you compare the various products available in the market. This helps you gauge the overall outlook as well as compare different parameters such as interest rates, fees and surcharges, pre-closure / prepayment penalties (if any), tenure as well as flexi payment options. It is highly recommended that you simply do not compare one parameter when taking a decision.
In case your loan application has been rejected, it is advisable that you wait for 6 months before applying again. This is primarily because if one lender has rejected your application due to let’s say your credit score/eligibility then, it is likely that the next one will also do the same. Multiple rejections can significantly affect and lower your credit score.
Keep in mind these few things if you are planning for an unsecured loan. You can now easily avail a Personal Loan on Bajaj Finserv MARKETS and take advantage of a plethora of benefits like fast application processing, quick dispersal and many more!
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