Personal Loan for First Time Borrower

Posted by FlexSalary on June 29th, 2021

Taking a personal loan for some needs or emergencies has become commonplace. While back in the days a personal loan or any loan for that matter has not been easy to get, now it is otherwise. With many lenders and online lending platforms, getting a loan is easy. Despite being a common thing, it is important to get the loan carefully. While taking a personal loan, the first time borrowers should do a check on a few important things. Following are the 5 such points that may be new to credit applicants but a must to consider.

1. Need and Payback Capacity Assessment: Getting a personal loan has become a very easy thing nowadays. After the online lending boom, this has become very common lately. Easy availability, online documentation, and verification, competitive rates, etc. are many things that could make an attractive deal on a personal loan for the first-time borrowers. But, it is never suggested that you should go for a personal loan just on a whim. As ultimately any loan is a liability so you must be careful before increasing them. A few questions are given below that you should ask yourself before taking a personal loan.

• Why do I need this money?

• If the need can be curtailed?

• How much to borrow? 

• How much would I have to pay added with the interest?

• Can I pay back the loan easily with current resources?

• How will the loan affect my present budget and lifestyle?

With these questions, you can easily assess if the loan is actually needed and the end solution. After this, you can decide what is the exact sum that you should borrow as a personal loan. This will help you to plan a balance between your budget and loan as well.

2. Credit Score Check: Credit score could be something new to credit applicants but plays a very big role in the approval of the personal loan. It is the ratio of your income over the liabilities. It varies from 300 to 900 points. The better the numbers, the higher the chances of getting a loan. 750 is considered a decent score for a personal loan. Checking the credit score is the first thing that your lender will do on your personal loan request. To save yourself from loan rejection, it is better that you already evaluate your credit score and then apply for the loan.

Impact of Credit Score on the Loan:

• Lower the credit score higher the rates of interest and vis-a-versa.

• Lower credit scores bring down the eligibility criteria for the borrower. 

• A lower credit score can impact the tenure of the loan as well and thus raising the monthly payable sum.

If you consider such things beforehand, approval on the loan can be easier. Also, you can adjust your sum to apply for. There are a few things that can be done to improve the credit score:

• Showing the raised or higher income

• Revealing multiple sources of income

• Bringing down the liabilities, like paying off a running loan

• Not having multiple loans

• Not defaulting in repayments of your past loans

3. Eligibility Check: Checking the eligibility of a personal loan for first-time borrowers could be the most important thing to do. It tells you to get a loan that meets your needs along with budget management. Plus, it saves from any failure on the approval of the loan. If you apply within the pre-approved limit or as per the eligibility application is processed as then the lender doesn’t have to check all these matters. You can have an eligibility check on your own as well as through a lender or an online portal.

A credit score is directly proportional to the eligibility for a loan. It may be new to bank customers who are borrowing a personal loan for the first time. And there are chances that they don’t have any credit score at all. But, with an eligibility check, such things can be looked upon and sorted out.

4. Choose the Right Lender:  So many lenders are present in the market, online and offline. You can choose one that suits your requirement and pocket the most and apply for a personal loan easily. Since there are many online lending platforms and lenders it could be confusing for the new to credit applicants who are taking a loan for the first time. Following are some points that should be kept in mind while choosing the right lender:

• Check if the lender is registered with RBI or not.

• The rates offered should be comparatively lower.

• Make sure the lender doesn’t impose any charges such as prepayment fee if you pay off the loan before the tenure.

• Flexible tenure and flexible payback options are added benefits.

• There must not be any hidden charges or additional fees like instant approval fees, etc.

5. Proper and Careful Documentation: Documentation plays an important role in the quick approval of the loan. You must check all the necessary documents and keep them handy with you before filling the loan application. It may be new to bank customers who are applying for the loan for the first time ever but all the information is available online. You can check any trusted site and know about the necessary documents.

If you are taking a loan offline, you can reach out to the lender for the information. For an online loan, the documentation is done digitally, so you must have scanned copies of all the required documents. Also, it is important that you keep a record of everything you are giving for the loan.