A personal loan provides you with instant funds when you are in need. Lenders generally check your credit score (along with other criteria) to assess your debt history and approve your application. However, if you are a first-time borrower, then they don’t have any report or score to verify your creditworthiness. So, does that mean you don’t qualify to avail of an instant personal loan online? Fortunately, the answer is NO – you still have options that you can leverage.
As new credit borrowers, there are a few things you much keep in mind – here are a few pointers to help you get a loan for the first time.
What to Do as a New Credit Borrower to Avail of Personal Loans
Select the Right Lender
There is a plethora of banks and NBFCs that offer personal loans at easy and attractive terms. Choosing the right lender can be a bit overwhelming for borrowers. Also, these financial institutions make hundreds of spam calls and send several messages each day, to sell financial services and products, such as credit cards and loans. Many of these callers are frauds while others make false claims. You need to refrain from falling prey to such practices.
Have a clear goal, search on the internet to know about various options, read terms and policies on their official websites, and then make an informed decision. KreditBee is a reliable FinTech platform that offers instant personal loans to first-time borrowers. It requires minimal documentation, and the entire approval process takes 10-15 minutes. The best part is the application process is completely digital so you can apply for the loan online from anywhere and get the funds transferred to your bank account once approved.
Avoid Too Many Loan Applications at a Time
Never apply for multiple loans at a time as it can hurt your chances of getting approval for a personal loan. Lenders send every loan request to credit bureaus to assess the borrower’s creditworthiness, which is listed in your credit report. Sending various loan applications within a short span is looked down upon by banks and lenders, as they consider it a sign of credit risk. It not only reduces your chances of getting a loan but affects your credit score too, which can impact your personal loan eligibility in the future. Always search for the best loans, determine what’s fit for you, and then apply for it.
Choose a Loan with Low-interest Rate
Personal loans are usually known to have higher interest rates, which can be anywhere between 11-20%. So, even a small drop in the interest can make a huge difference to the total cost of your loan. For your convenience or any other reason, if you choose to repay the loan with a low monthly amount rather than a long repayment term, then you might have to face a higher interest rate. This means that even though small monthly repayment may seem a viable option, you will ultimately pay more for the loan throughout its lifetime. Therefore, while applying for personal loans online, make sure that you spend a maximum of 35-43% on debt and not more than that.
Calculate Monthly Installments (EMIs) Carefully
You must borrow what you can afford to repay. Your EMIs shouldn’t exhaust your savings and emergency funds or put a strain on your monthly budget. To avoid adding a burden on your finances, use an EMI calculator to evaluate your monthly repayment amount and tenure. It will help you ensure your capital capability to repay the loan within the stipulated time. This is a useful tool for first-time personal loan borrowers and helps them set clear goals. The standard rule is- your monthly instalment should be less than 10% of your salary and if it exceeds this limit, you might drain out your savings. It can also take a toll on your daily expenses and affect your credit score.
Check the Foreclosure Rules
As you apply for an instant personal loan online, you will find that most loans have an option to foreclose before the end of their repayment tenure. In case you want to clear off your debt before the given date, get yourself aware of the applicable foreclosure charges on your personal loan. Many lenders charge additional fees to recover the interest they expect on the loan. Check the minimum lock-in period, fees associated with foreclosure, and other rules carefully before you send your application.
If availed of for the right reason, a personal loan can be highly beneficial. However, as a new to credit borrower, you will need to keep a few things in mind and then – you need to ensure that your lender is genuine and honest and that all the repayment terms are consistent. Consider each factor, ask questions whenever in doubt, and once you are sure of and clear about every point listed in the policy, send your application to the lender
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