There are times when one needs quick access to funds. It can be due to a variety of reasons, ranging from medical emergencies and education costs to home renovations, debt consolidation, and more. And that’s where personal loans for first time borrowers come in, with their flexibility and ease. 

But if you’re a first-time borrower, the lending process can seem a little confusing. And the major reason behind this is the deficit in knowledge regarding a variety of factors. Some of these factors include documentation, repayment terms, eligibility, interest rates, and more. 

However, if you try to gain a clear understanding of these factors, the personal loan borrowing process becomes as easy as it can be! 

What Is a Personal Loan?

It is a personal loan when banks and other financial institutions offer an unsecured loan to individuals to help them meet a variety of financial needs. The fact that such loans are unsecured means that the borrower doesn’t need to provide collateral (in the form of gold, property, etc). 

Furthermore, the loan amount is repaid via fixed EMIs over a chosen period (known as the loan tenure). The interest rate in such loans depends on factors such as credit profile, income, repayment history, etc. 

Check Your Eligibility Before Applying 

Lenders approve any personal loan application only after they check if the borrower is likely to repay the amount comfortably. And that’s what the eligibility check is all about. If a potential borrower meets the basic criteria, they can easily get a personal loan. 

The common eligibility factors include: 

• Age: Most lenders require the borrower to be between 21 and 60 years of age. 
• Income Stability: If one has a steady monthly income, borrowers feel confident about the borrower being able to repay the loan on time. 
• Employment Type: Although both salaried and self-employed individuals get personal loans, the requirements may differ accordingly. 
• Minimum Monthly Income: Several lenders set a minimum income threshold depending on the city, profession, and other factors. 
• Existing Financial Obligations: Current EMIs and debts affect eligibility. 
• Credit History: Previous repayment behavior is carefully reviewed.  

Lenders evaluate repayment capacity before approving applications, so borrowers should assess their finances honestly before applying.

Understand Your Credit Score Matters 

An individual’s credit score plays a major role in deciding whether a lender will offer them a personal loan. The interest rate they receive also depends heavily on the same. That’s because a higher credit score lowers the risk for the lender. 

Typically, a credit score for personal loan approval above 700 is preferred by many lenders. This means that maintaining a healthy credit score is vital to be eligible for a personal loan. 

Here are some ways to do that: 

• Always pay your EMIs and bills on time
• Always maintain a healthy bank balance
• Do not apply for multiple loans at the same time 
• Use your credit responsibly 
• Keep monitoring your credit score regularly 

Documents You’ll Need 

If you keep your paperwork ready, the approval process of your personal loan gets sped up. The personal loan documents required may vary slightly across lenders, but the commonly requested documents include: 

• PAN Card
• Aadhaar Card
• Address proof
• Salary slips or income proof
• Bank statements
• Employment proof (if required)

Some lenders may also request additional documents depending on the applicant’s profile and loan amount. 

Get more information on: Loan on Aadhar Card

Avoid THESE common mistakes made by first-time borrowers

If you’re a first-time borrower of a personal loan, there are some mistakes you must avoid. These mistakes can even end up making borrowing difficult, complicated, and unmanageable for you. 

Some of these common mistakes are as follows: 

• You borrow more money than you actually need 
• You overlook (or ignore) the vital pointers in the loan agreement 
• You apply to multiple personal loan providers simultaneously 
• You fail at calculating the EMI affordability (in other words, you fail to check if you’ll be able to pay the EMIs comfortably) 
• The above point also means that you overlook your own capacity for the monthly repayment 
• You choose lenders without reviewing how credible they are 
• You miss out on checking EMI due dates once the loan is approved 

Tips to Improve Personal Loan Approval Chances 

Let’s say you need a personal loan right now or in the near future. 

If you really are, certain factors will make you much more eligible. 

Here are some of those tips: 

• Always apply for a realistic loan amount 
• Maintain all records of your consistent income 
• Always keep your debt-to-income ratio as low as possible
• Make sure the documents you submit are updated 
• Keep reviewing your credit reports for errors periodically 
• Before you apply, always avoid unnecessary credit enquiries 

Why Choose a Trusted Lender Like Ramfincorp? 

Here’s why Ramfincorp ticks all the boxes. 

Here’s why: 

• They offer a quick and seamless application process
• They offer competitive interest rates
• Their loan terms offer transparency 
• They have a dedicated and available customer support team 
• Their lending practices are as secure and reliable as they come 

Conclusion 

If you’re applying for your first-ever personal loan, don’t let anyone tell you that it is complicated. Why? Because it can be as seamless as possible. And it is a guarantee if you choose to borrow from lenders like Ramfincorp. 

But wait, you should also make sure that you gain a clear understanding of eligibility factors like the loan terms, credit score, and the repayment responsibilities that come with a personal loan. 

When borrowing, these factors play a massive role in making sure that your personal loan experience turns out to be just the right financial move that you wanted to make! 

FAQs 

1: If I want to get a personal loan, which documents should I keep handy?

To apply for a personal loan, you should keep documents like your PAN card, Aadhaar card, salary slips, bank statements, and address proof ready. Some lenders may also ask for income tax returns or employment proof for verification.

2: When it comes to a credit score, what is ideal to get a personal loan?

A credit score of 700 and above is generally preferred by most lenders for personal loans. A higher score improves your chances of approval and may also help you get lower interest rates.

3: What are some factors that affect the interest rates on a personal loan?

Personal loan interest rates depend on factors such as your credit score, income, repayment history, loan tenure, and employment type. Borrowers with stable income and good credit history usually get better rates.