Most common Personal Loan issues faced by borrowers in India

Whether you have a wedding at home, or planning a vacation or any other short term expense to meet, you can easily rely on a personal loan for funding those expenses. After all personal loans are easy to apply and hassle free as banks usually charge meatier interest rate for these loans. These are great for short term needs as you can independently take charge of your expenses, provided you have a steady income source.

You can opt for either secured or unsecured personal loans. Secured personal loans are cheaper as a property or any other asset class would be used as a mortgage for these loan. Thus, the interest rate of a secured personal loan is always cheaper than an unsecured loan. However if you do not have a security to back up your loan application you can still go for an unsecured personal loan. While the loan interest would be more, it is preferable as you get these loans with minimum paperwork.

But before you decide to apply for a personal loan you must know common problems you may face as a borrower in India. You need to about personal loans eligibility to evade all the loan problems.

One of the biggest issues is rejection of the loan application. If one bank rejects the loan, there is a possibility that the other bank would also reject it. So the foremost step to tackle issues of personal loans you should ensure that your application would not be rejected in any case.

The applicant has to have a steady income source or multiple sources of income and s/he needs to establish the proof of income along the loan application. In case you fail to prove your income you would not get any loan sanctioned on your name. If you do not have an income all you can do is depend on your family member or friend who is earning well and get a joint loan.

Next your credit history is another factor that would determine if your application would be accepted or not. When you use credit products offered by bank and pay them diligently every month you build a good history and banks consider you prospective client for future dealings too. With good history you are reliable to lend funds and thus your credit worthiness also improves. So a person who has a good history ought to get a loan from his bank without any hassle.

The measure of your credit worthiness is your credit score. CIBIL maintains your score based on your financial habits. The number of loans you have applied in the past, payment of your credit card bills and utility bills together helps CIBIL measure your score. The better the score, the more reliable you are considered for extending loans. A bank always checks your loan repayment capability before borrowing the funds.

Similarly if in case you have other pending loans on your name, your loan to income ratio would be low. A bank would consider your worthiness of paying back loan based on your real time income after deducting the EMIs.

However if you want loan for low CIBIL score, you need to particularly look out for lenders who are interested in giving loans to defaulter or those with low scores. Applying to popular banks and getting rejected would only deteriorate your score.

Besides having a clean history, you should also have proof for the same. Applications with complete paper work in the first attempt are promptly approved.

Another issue that may bother you when you apply for a personal loan could be a bank’s discretion in gauging your credit worth. A personal loan is available from Rs 20,000 to Rs 20,00,000. The issue that can bother the applicant could be when the bank approves only a part amount of the application. Say, you applied for Rs 20 lakh and the bank approved only 10 lakh, you would be under a big muddle as your financial planning would fail. You would have no choice but to look out for other avenues to fund the expenses or negotiate with the bank.

To save such issues, it is very important that you do some homework and gauge your own credit worthiness before applying for a loan. Never apply for unrealistic amount as bank would either reject the application or quote a very high interest rate. In either of the situation, you would not be satisfied.

Next when you fill the application you would also need to know if you want to apply for loan based on floating interest rate or fixed rate. For short term loans, go for fixed rates while for the long run loans you may consider floating interest rates.

Always consider total cost of loan when you pursue one. Sometimes skipping some real time expenses in your calculation can put you in a tizzy. For example, loan processing fee is non-refundable, so you should not forget to add it to the cost of taking up a personal loan.

All in all, getting personal loans is easy as long as you take note of the points discussed above.

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