10 Tips for a Successful Personal Loan Application

Updated on: 19 Jan 2024 // 3 min read // Personal Loans
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A Personal Loan is a type of loan is that is used for personal expenses which may include, repayment of debts, wedding expenses, taking a vacation, buying electronics, home renovation, and unexpected medical expenses, amongst others.

Typically unsecured, Personal Loans are offered on the credibility of the borrowers, along with their capacity to repay the amount. The amount that can be procured through this type of loan varies between 50,000 to 50 Lakhs, while the tenure of repayment may range from 24 months to 60 months.

Personal Loans are usually offered by Banks, Non-Banking Financial Companies (NBFCs) and Online Lending Agencies. The latter are fast becoming the most trusted sources for this type of loan because of a quick and easy digital application procedure, fast approvals, and swift disbursal of the approved amount.

Now that you know of what exactly a Personal Loan entails, here are some terms that will help ensure a successful approval for you while avoiding common Personal Loan mistakes!

1. Purpose

While Personal Financing can be used for varied purposes, most people apply for this loan to meet expenses pertaining to –

  • Home renovation
  • Medical emergency
  • Wedding
  • Education Fees
  • Travelling

Some people also resort to this loan to purchase a new or used automobile, make a down payment towards the purchase of residential/commercial property and other such expenses. It is essential that you have a clear picture of the purpose beforehand so that you can understand if the interest and the tenure of repayment are worth your while.

2. Eligibility

Given that a Personal Loan does not require any security, the lending institution is bound to check your eligibility before signing off on loan. It is important that you are a self-employed professional, an employee of an organisation or the owner of a business, with a minimum monthly income of 30,000. Your age and occupation also act as deciding factors for the institution for Personal Loan eligibility.

3. Credit Appraisal

This is primarily a quick-check conducted by the bank or the lender to test your ability to repay the loan. For you to pass through this, it is vital for you to have a favourable credit history and a credit score of 700 or above.

While your loan application may get approved even when you do not have a reasonable credit score, but in that case, you can expect the interest rates to be on the higher side.

4. Loan Disbursal Process

This is the process, wherein the approved loan amount is handed over to you in the form of an account payee cheque/draft or via an electronic transfer to your savings account. While the disbursal process may take up a few weeks’ time in case of a bank, an online lender usually takes only a few days to disburse your loan amount. For instant Personal Loan Approval and quick disbursal, visit MyMoneyMantra, the leading online lending marketplace.

5. Duration

Depending on the repayment capacity, the lender will offer you a period ranging from 12 to 60 months to repay the loan amount. This repayment is usually divided into Equated Monthly Payments (EMIs). The higher the EMI, the quicker will you be able to pay off your loan.

6. Interest Rate

Lenders offer loans, with an aim to earn interest on the principal amount over a period of time. In case of a Personal Financing, the interest rate can be anywhere from 10.99-22.00% per annum (may vary from lender to lender). The interest is divided equally and is added to the EMIs for convenience. As mentioned earlier, good credit history and credit score will ensure lower interest rates and vice-versa.

7. Extra Charge

When a bank, NBFC, or an online lender offers a loan, they usually charge a processing fee. This fee typically ranges between 2-5% of the amount of loan and is non-refundable in nature. In some cases, this fee may be waivered, owing to the long-term relationship shared by the lender and the borrower.

8. Part-payment

In some scenarios, a lender may choose to make a part payment, which is either equal to or more than the next scheduled EMI. A part-payment is usually done in order to lower the EMI and/or the interest rate.

9. Prepayment

This is a tool, which can be used by a borrower to pay a large part of the loan before the due date. Only allowed by some banks and online lenders, pre-payment can be done after the first 12 months. In addition, the borrower is liable to pay an additional fee ranging from 1- 2%of the outstanding amount.

10. Foreclosure

Foreclosure refers to the complete repayment of the loan amount before the end of the loan tenure. As in the case of prepayment, even foreclosure requires the borrower to pay an additional fee, ranging from 2-5% of the loan amount.

To apply online for Credit Cards, Secured Loans and Unsecured Loans, visit www.mymoneymantra.com, the leading online lending marketplace that offers financial products from 60+ Banks and NBFCs. We have served 2 million+ happy customers since 1989.