Thinking to apply for a personal loan to take care of an unexpected big expense that your savings can’t cover? A personal loan may be a good option with its unsecured status and the availability of so many options in the marketplace. You may already have started searching for eligibility criteria for such loans but what will also help is knowing how the lender perceives your application. Here are the top factors lenders assess when they get an application for a personal loan in Ludhiana.
Factor 1: Credit score
The first and foremost factor that the personal loan provider looks at is your credit score. A score above 700 is a good indication to the lender that you will make a wonderful, trustworthy borrower who will repay the loan on time. The chances that your loan will be sanctioned are clearly higher when this is the case. Your credit report tells the lender how you manage your payments. The credit rating and report combined give the lender a clear picture of your debt management capabilities and tell them whether you are a good risk or not.
Factor 2: Salary/ employment
To understand how easily you may be able to manage repayment, the lender needs to know what your regular income is and whether it comes from a sound source that is likely to sustain through the tenure of your loan. Your maximum loan amount will also be calculated based on your income, that’s how important it is.
If want to take a very large personal loan in Ludhiana, having a very large monthly income helps the lender gain confidence to sanction the loan. If your loan amount is small, then a limited monthly income may not deter your lender from giving you the money.
Your employer also plays a role in making you seem like a good or bad risk. An employer of repute who has been long-standing in the marketplace indicates to the lender that your monthly salary is not likely to dry up without notice.
Factor 3: Favourable debt to income ratio
You may have a good income but if you already have several debts lined up that you are paying back, you may not have any salary left over after repaying them to make good a new loan. A lender pays special attention to your debt-to-income ratio to see how many liabilities you already have running. Keeping your debt low, especially in relation to your salary, is a great move to ensure your loan application is not rejected outright by a personal loan provider. If you have several debts open, then see if you can pay some off before you apply for a fresh loan.
Factor 4: Down payment
The down payment is the cash that you pay upfront for a purchase. The rest of the purchase price is funded by the loan amount. The larger the down payment, the less you need to borrow and so the smaller your loan amount. A large down payment tells the lender that you do have liquid finances and are not desperate for a loan to fulfil your need. The personal loan provider is now aware that if he cannot offer competitive rates and terms for the loan, you have the financial clout to postpone the expense a bit until you can shop and find the right lender with favorable terms. Keep in mind that a large loan means you shell out more in terms of overall repayment over the life of the loan. A small loan amount saves you a lot of money here.
When you have decided to opt for a personal loan in Ludhiana, carefully read through and understand all these points to learn how to take out and manage a loan responsibly. A personal loan is an advantage when you make the right kind of use for the right expenditure. The same loan can cause damage to your financial reputation if you enter into it with scant thought as to how you will repay and what will happen if you don’t. Before you apply for your loan, understand its terms and conditions thoroughly, ask questions and ensure the lender can clarify all your doubts satisfactorily.