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5 Crucial Things to Know Before Availing a Loan

What do you do when you are in urgent need of funds? You try to go for a loan. Remember, a loan is a commitment to repay. You have various loan products to choose from in the market. Banks are also very aggressive in approving loans like Home Loans, Personal Loans, Credit Cards, and so on. However, that does not entail you should rush to borrow money at the earliest opportunity.

It is advisable to know these 5 crucial things before availing a loan:

1.   Credit Score

You will hear the term ‘credit score’ many times whenever you apply for a loan from a bank. What is the credit score? It is a three digit number (300 to 900) that determines your repayment capacity based on your credit history and various other factors. Four credit bureaus in India procure the credit information of the customers from the member banks. Now, all banks in India are members of these credit bureaus, especially TransUnion CIBIL. Your credit score is the most crucial factor that determines your loan eligibility.

Different loan products have different eligibility criteria. A score of 600 and above is okay for a Home Loan. You need a credit score of 650 and above to Get a Personal Loan approval. Know your credit score. You can obtain one report free on an annual basis. Go through the credit history and dispute inaccuracies, if any. It is advisable to do a self-review of the credit report at least six months before you apply for a Personal Loan.

2.   Know Your Needs

Banks are liberal today in approving loans for people with good credit history. However, that does not mean you should apply for amounts beyond your needs. You might have a sound Personal Loan Eligibility. But, you should stick to your needs and restrict your borrowings accordingly. A high level of unsecured borrowings can also affect your credit score. It can leave with a low score thereby making it difficult to apply for other loans. Remember, you might have to go for a housing loan later on in life. Do not borrow to splurge on luxuries. Use your money for the same. 

3.   Calculate Your EMI

Banks have different ways of calculating your eligibility. There is the concept of take-home pay. Many banks stipulate a minimum take-home pay of around 50% for Personal Loans and 45% for Home Loans. You can calculate your EMI (Equated Monthly Instalment) using the EMI Calculator Available Online. You will be aware of the amount you have to pay if you avail a loan. It can also help you alter your budget and make minor adjustments. Keep a sizeable amount available when you calculate your loan affordability online. Try to keep your Personal Loans for short tenure. Calculate your EMI accordingly.

4.     Compare various loan products

In this age of the internet, you have the facility to compare the various loan products from different banks on a single screen. Loan service providers like www.mymoneymantra.com can help you get the best offers in the industry. Many people do not compare these products and jump at the first offer they receive. It is one of the biggest Personal Loan mistakes you commit. You can also compare the interest rates, processing fees, prepayment clauses, and other vital information. Different banks have different eligibility criteria. You get a fair idea about your loan eligibility when you make the comparison.

5.     Keep your documents ready

You have decided to go for a loan. Once you have done the initial homework, you should be ready with the requisite documents. These documents include the standard KYC documents for identity and address proof. These documents include the following.

Identity Proof

  • Passport
  • Aadhar Card
  • Driving license
  • Voter’s ID Card

Address Proof

  • Passport
  • Aadhar Card
  • Driving License
  • Registered Rent Agreement

Income Proof

You should also have your income proof documents on hand. These documents depend on the nature of your employment or business. In case of salaried individuals, the following documents should suffice.
  • Last three month’s salary slips
  • IT Return / Form 16
  • Bank account statement

In case of self-employed persons, the following documents are necessary.
  • IT Returns for the previous two years
  • Bank account statement
  • Proof of business

You should ensure to produce the latest documents to the banks when you apply for a loan.

Knowing these 5 crucial things is essential before you apply for any loan from banks or other financial institutions. Your income, repayment capacity, and your credit history are the three principal criteria for approval of any loan.

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. 

Talk to our Loan Specialists toll-free at 1800 103 4004 to know more about our products and offers. 
5 Crucial Things to Know Before Availing a Loan 5 Crucial Things to Know Before Availing a Loan Reviewed by Lokesh kumar on 12:30 PM Rating: 5