How Do You Get a Personal Loan? Financial Experts Explain

According to the RBI, personal loans experienced a year-on-year growth of 9.9% between FY2017-18 and FY2018-19. This rapid rate of growth for such products is primarily due to the ease at which the borrowed quantum is available to consumers. 

• Personal lending grew at a rate of 28% in the third quarter of 2019 when compared to the same period in the previous year.

Furthermore, personal loans have become popular to fund various expenses, including weddings, travel plans and debt consolidation. At such a time, it is imperative that consumers across the country are aware of the exact process to get a personal loan whenever necessary.

Step 1: Consider the following factors before a loan application

Before setting out to find the right lender, a loan applicant must consider a few aspects, which are crucial for his/her borrowing experience. 

1. CIBIL score

To get a personal loan, an applicant must hold an impeccable credit rating. CIBIL scores reflect the creditworthiness of an applicant and it is a crucial determinant for most types of credit approval. Since CIBIL score is important for personal lending, an applicant must ensure that his/her score is at least 750 or above before approaching a lender.

• 74% of Indian consumers check their credit rating twice every year, as per a 2017 survey.

• The same survey also revealed that around 62% of consumers did not know that lenders monitor their credit report before approving terms for a loan. 

Thus, a consumer needs to check CIBIL score for personal loan to avoid any hassle or face loan rejections in the future.

2. Principal for the loan

Next, one should proceed by determining the exact amount of the personal loan. Here, it is important to understand that availing only as much as necessary is the key to burden-free loan repayment. Moreover, lenders are more likely to approve applications of a lower sum.

• Average personal loan balance per account in Q3 2019 was Rs.1.82 lakh.

Thus, to ensure hassle-free loan approval and get a personal loan at lower rates, it is always better to opt for only as much amount as necessary.

3. Loan EMIs

Another important step before availing such credit is to plan personal loan EMI repayment better. This way, a borrower is aware of the exact financial burden that he/she would need to bear during the repayment tenor for such loans. Personal loan calculators, available online, can help determine the EMIs.

One should ensure that the monthly installments do not become too challenging for them. If that is the case, they can try lowering the loan quantum in the calculator or increasing the tenor. 

Step 2: Choosing the right lender

Interest rates on personal loans can vary significantly between one lender and another. Thus, an individual must compare the rates from all financial institutions before deciding where to apply. 

• Personal loan interest rates can vary between 12% and 24% amongst the various lending institutions. 

Thus, one should never avoid comparing personal loan interest rates. Some NBFCs, such as Bajaj Finserv, also offer Flexi Personal Loans, which help you in further lowering your EMIs by up to 45%*. 

The company also provides pre-approved offers to simplify and accelerate a loan application process. These offers are available on a range of unsecured credits, including personal loans, business loans and more. You can check your pre-approved offers in just a few minutes by submitting your name and phone number.

Step 3: Meeting eligibility criteria and documentation process

After picking the preferred lender, a prospective borrower should check the eligibility criteria for personal loans from this company. Apart from the CIBIL score, other factors determining eligibility include monthly income, age, and employment. Additionally, one should also determine what important documents are required while applying for a personal loan.

Step 4: Application procedure

After one completes the steps listed above, they should start the application process with his/her chosen financial institution. Most institutions today offer both offline and online loan application systems. Those choosing to avail a loan offline should head to one of the lender’s branches with necessary documents. 

Online application, on the other hand, involves the following steps.

• Visit the lender’s website and fill up the online application form.

• Attach copies of documents necessary to avail of the said loan. 

• Choose the loan tenor and principal.

• Submit the application after rechecking all details provided in the form. 

Reputed lenders approve loans in just a few hours. If approved, wait for the loan amount disbursal to your account.

Following the detailed steps mentioned above should ensure you to get a personal loan with minimal hassle and delay. A prospective lender should also contact their chosen lender directly to learn about additional terms and conditions on such a loan if any.