4 smart steps to boost your personal loan approval chances

If you are contemplating applying for a personal loan, it is recommended to undergo the necessary steps before you opt for the loan. These include carrying out necessary research, comparing interest rates offered by different banks, submitting your application, and finally choosing the one that offers the best deal to you.

These are the four key steps to follow:

I. Do the necessary research: First of all, the borrower is supposed to carry out necessary research, which includes finalising the personal loan amount that you need as a loan, exploring the banks and NBFCs that are reliable, factors you should be careful about, and so on. The preliminary research requires you to ask people around for their feedback.

II. Compare interest rates: The second important step to follow is to compare the interest rates offered by different banks. Generally, reputable banks charge lower rates of interest, whereas fintech and NBFCs charge a slightly higher interest rate.

As an applicant, you should first of all prepare a small list of banks and NBFCs that charge an interest which you can afford.

III Apply for loans: Once you have a small, ready list with you of the financial institutions where you can apply for a personal loan, you need to make sure that you do not apply with them indiscriminately. It is recommended to apply for a select few only. Notably, applying for a personal loan leads to a hard inquiry by credit information companies, or credit bureaus, which leads to the loss of credit score, albeit marginally.

IV. Choose the one that suits you the most: Finally, if you have an offer or two from the bank(s), you can obviously go for the bank or fintech that gives you the best loan offer. And this choice of bank should not necessarily depend only on the rate of interest, but also on other factors such as its customer service, reputation, reviews of customers, and your prior experience with your bank.

As a prudent borrower, you should also keep in mind that your credit score plays a crucial role in deciding your personal loan interest rates, terms, and associated conditions.

What is the role of your credit score in personal loan approval?

1. A good credit score improves the chances of personal loan approval. As it showcases repayment integrity.
2. Higher credit scores help in facilitating lower interest rates and easier repayment tenures.
3. Lenders may sanction higher loan amounts for stronger credit scores.
4. A high credit score reflects a borrower's financial discipline.
5. To ensure easier terms in repayments, one should have a higher credit score.

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