Personal loans are multifaceted financial products that can be utilised to meet most financial requirements, ranging from medical expenses to foreign trips. The greatest advantage of personal loans is that they can be availed without pledging collaterals. The fact that they can be availed without eroding the equity of a borrower’s assets certainly serves as one of their prominent benefits.
Nonetheless, availing of a personal loan without security requires meeting several eligibility requirements. Therefore, it is important that you have a clear idea of all such requirements before availing one.
How to ensure approval of a personal loan without security?
Calculate the precise fund requirement
Availing large funds just because a lender is offering so isn’t a wise choice. Loan repayment involves bearing the cost of interest. Larger the fund, the longer will be the tenor and higher will be the interest outgo. Additionally, different purposes might require varying loan amounts. For instance, purchasing an appliance would not involve as much expense as that of higher studies abroad.
Therefore, it is necessary to calculate the exact loan amount required before applying so that one can avoid paying interest on unnecessary funds. This, along with an idea of your current finances, can also help you decide when it is a good idea to avail a personal loan.
Know where to apply for an unsecured personal loan
Several types of financial institutions, including NBFCs, offer unsecured funds of different amounts at varying personal loan interest rates and other terms. Do your research and compare different lenders’ policies before approaching one with the criteria most viable for you.
Look for pre-approved offers
One way to assure prompt approval and transfer of funds is by getting yourself pre-qualified for one. Leading financial institutions extend pre-approved offers against credit means, including personal loans. These offers are also available against business loans, credit cards, etc. Borrowers should check their pre-approved offer before applying with their lender.
Calculate EMIs
Most lending institutions have a personal loan calculator and EMI calculator on their website that gives individuals an estimate of their borrowable amount as well as repayment breakup. Accordingly, you can adjust your fund requirement depending on the EMI amount you can afford, given you current financial standing.
Additionally, check for other details like repayment tenor, pre-payment fees and additional charges like processing fees, documentation fees, etc.
After you have ticked all of the above checkboxes, it is time to check your personal loan eligibility according to the concerned lender.
Things lenders look out for in the absence of collaterals
Firstly, lending institutions make sure applicants match the following eligibility criteria to qualify for a personal loan.
Age: 23-55 years
Employment: Must be employed with a public/ private company, MNC, or be self-employed.
Residential status: Indian.
When applying for a personal loan without security, lenders pay extra caution to other conditions like:
Credit score: It reflects the repayment history of past loans, credit card bills, etc. Higher the CIBIL score, more the credibility.
Employment stability: A steady income source assures timely EMI payment.
Credibility of co-signer: Individuals with low credit score can get a co-signer with a good financial record. In such cases, the lender will prioritise scrutinising the creditworthiness of the co-signer.
Net income: Your net worth income is crucial in deciding if you can maintain an uninterrupted cash flow and hence, decides the online personal loan amount you can afford.
Co-existing loans: Presence of multiple loan debts shrinks your disposable income and influences your repayment capacity for future credit.
Borrowers must check their eligibility as per the above parameters to ensure optimum chances of approval when availing of a personal loan without security. You can also check how personal loans can provide you tax benefits, to reduce your tax liabilities for a particular year and ensure maximum savings.
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