Loansare easily available, but not all loan applicants will get an approval. There are, however, ways to simplify your loan application process. When you understand the process better, it becomes likelier that your loan application will be approved.
Take a look.
1 – Apply For A Paperless Loan
Online loan aggregators can help you get your loan approval in an instant, paperless manner. These loan products have a quicker turnaround time and lower need for documents. Basically, your bank or Credit Card company may have pre-approved a loan for you based on your profile, and this loan may be availed with minimal documentation.
2 – Know What You Want
Before applying for a loan, doing a little research can help you get faster approvals. Today, loan options are available for various needs like automobile,home purchase, personal needs, education costs, etc. Knowing what you want increases your loan approval chances. For example, if you are planning to raise money for business, there are term loans, working capital loans, collateral free loans etc. So understand your requirements and shortlist the type of loan apt for your need. Check the details of the loan tenure and rate of interest to shortlist the right loan for your needs.
3 – Know Your Credit Score
You can make an informed loan purchase if you know your Credit Score. Often, loan seekers don’t hear the words “Credit Score” till they’re deep into their loan application process. This needn’t be the case. Loan interest rates are gradually being tied to your Credit Score, which is a reflection of your creditworthiness. Therefore, you should check your Credit Score periodically, but especially before you apply for a loan or Credit Card.
You can check your score right now, online. You can avail one free Credit Report for the year from credit information companies such as CIBIL and Experian. Alternatively, you can also avail free Credit Reports instantly through third-partyCredit Report generators. A Credit Score is a numerical expression of your creditworthiness, and ranges between 300 and 900. If you have a score above 750, you can avail loans at attractive interest rates.
4 – Evaluate Your Loan Repaying Capacity
Banks seek your debt to income ratio (DTI) before approving a loan. This ratio is your gross income after deducting all existing debts. A lower DTI ratio implies that you maintain a healthy balance between debt and income and have headroom for additional debt. A higher ratio would impede your ability to take on further loans, and may therefore lead to loan rejection.
DTI can be easily calculated before applying for a loan. For example, your gross monthly income is Rs. 70,000, and you pay Rs. 20,000 as Home Loan EMI, Rs. 7,000 for Car Loan, and Rs. 5,000 for other debts. This means your total monthly debt equals Rs. 32,000, implying a DTI of Rs. 32,000/Rs.70,000 *100 = 45.71, which is fairly high. You may want to clear existing loans before applying for a fresh one.
5 – Approach Your Own Bank
Applying for a loan at the bank where you hold a savings account or business account may increase your loan approval chances. These bank branches know you and have an idea about your financial status. This may help speed up the loan process. You can also make use of good customer-banker relationship to get better deals and lower interest rates.
6 – Ensure Adequate Collateral Security
Banks may seek collateral securities for loan approval. A collateral security often depends on the type of loan you are seeking. Education and Business loans require collateral. This does not always mean a fixed asset like a residential or commercial property. You can also use financial instruments like bank deposits, NSC certificates, and LIC policies.
Finally, you must remain patient with your loan application and avoid making multiple applications. The more loan applications you fill out, the more hits your Credit Score will take, thereby reducing your chances of getting a loan sanctioned. When opting for a loan, present yourself as a credible borrower with all bases covered. If you fulfill the loan eligibility criteria, have watertight documentation, and a good Credit Score, your loan approval chances get great boost.
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