Personal Loan Without CIBIL Score

Whenever you need immediate funds, a personal loan is the only option you can find immediately. Many other credit options need time for approval and documentation. Some of them even need collateral, which isn't possible for everyone. Hence, a personal loan suits best to get funds for emergencies.

Today, getting a personal loan is easy as numerous lenders are available to provide personal loans matching your financial needs. However, if you are a first-time personal loan borrower, you must know everything about the personal loan.

Don't worry; this article includes all the crucial advice that is essential for first-time personal borrowers must read before proceeding to documentation.

Advice 1: Check whether You Really Need a Personal Loan

A personal loan is an unsecured loan with a higher interest rate than secured loan options (like a home loan, mortgage loan, gold loan, etc.). However, a personal loan has quick processing that can provide instant cash for emergencies.

You should evaluate the financial need, i.e., how quickly you need cash for your purpose. If you need quick funds for any event or medical emergency, go with a personal loan. However, you should prefer a secured loan if you have time and look for a lower interest rate.

Advice 2: Build Your Credit History

Chances are, first-time personal loan borrowers won't have any credit history. That will be challenging for you to get instant approval. So, before you plan to borrow a personal loan, it's higher recommended to start building your credit history.

The best way to build your credit history is by applying for a credit card. A credit card has become a new norm for professionals. Yet it is one of the best and most common ways to start your credit journey. You can approach any bank offering good offers and enough credit limit.

NOTE: Learn to use the credit card in the right way to avoid turning it into a debt trap.

Advice 3: Build Your Financial Knowledge

Not everyone is well experienced in the financial niche. This results in lack of knowledge; hence, some of you may even make the wrong decision when applying for a personal loan.

So, before you become a first-time personal loan borrower, it's essential to develop some technical knowledge about the financial terms. This will help you in researching and negotiating the right deal.

Advice 4: Research for Right Lender Selection:

Right lender selection plays a significant role in getting the right deal regarding personal loan amount, interest rate, and added facilities. Nowadays, private and public banks offer personal loans at highly competitive rates. Yet, you must research before short listing one from many. Read all the possible details about the bank and personal loan. Don't forget to read the interest rate, hidden charges, tenure, eligibility criteria, etc., before you proceed with any bank/lender.

The most important part is selecting an RBI registered/authorized lender, as you might fall into spam lenders draining your money without offering what you applied for. Investing time in research will help you save from fraud and post-approval issues.

Advice 5: Prepare Your Documents:

Once you have shortlisted the bank/lender, you have already checked the eligibility criteria. If it suits you best, note down all the pre-requisites to apply for the personal loan. Most important among all are the documents required for quick application. Whether you apply online or offline, you must ensure all the required documents are handy.

In case of offline application submission, you can approach the bank with the application form and attach copies of essential documents. However, via online mode, you can upload scanned documents that save time and effort.

Common documents for personal loan application include:

• Identity proof (copy of passport/voter ID card/driving license/Aadhaar)

• Address proof (copy of passport/voter ID card/driving license/Aadhaar)

• Bank statement of previous 3 months (Passbook of previous 6 months)

• Two latest salary slip/current dated salary certificate with the latest Form 16

Advice 6: Check Rate of Interest:

The interest rate is the principal percentage you will pay in addition to the principal amount. First-time personal loan borrowers must check the interest rate before applying.

You should know that personal loans are available with Floating and Fixed interest rates. Under a floating interest rate, the ROI changes with the change in market trends and RBI guidelines. It means the EMI or Tenure changes with time.

However, the ROI remains the same under a fixed interest rate, and hence everything (including EMI and Repayment tenure) remains the same. You should choose one among them based on your future plans.

If you want better financial planning, you should prefer a fixed interest rate on a personal loan. It will keep the EMI the same throughout your repayment tenure. In short, your budget will include a fixed portion for EMI.

Advice 7: Check all Charges & Fees:

Every loan is disbursed after a thorough process that involves time and manpower. Hence banks add processing fees with every loan request you make. Many other fees are included that vary from one bank to another. Thus, during personal loan disbursal, you must check out the fees and charges added to the principal amount. Comparing the fees and involved charges is better when searching for one option among many.

It's also essential to check out any hidden charges, foreclosure charges, etc., that might harm you afterward.

Advice 8: Learn to Bargain

You are already familiar with the bargaining trait of Indian Women. This bargaining skill works well when negotiating with the lender. If you have a good relationship with the bank, you may get a better deal on your personal loan application.

Negotiating and bargaining with the lender can help you get a lower interest rate and other discounts. You can brag about your high credit score.

Advice 9: Check Your Credit Score:

A credit score is a base for all credit facilities. It means every bank/lender checks your credit score to evaluate your creditworthiness before loan approval. It is considered the first parameter in loan eligibility criteria. You must check your credit score to ensure you easily qualify for the personal loan criteria.

You can quickly check your credit score from online portals. If you find a credit score above 750, you don't need to worry about loan approval. Credit scores below 750 might face some trouble getting a personal loan. Checking your credit score will help you in decision-making.

Advice 10: Know Foreclosure Rules:

You have done the fundamental research for getting a personal loan. But wait, have you checked the foreclosure rules? Yes, it's a crucial point that first-time loan borrowers avoid, so you should ask the bank for foreclosure rules. You must note that foreclosure isn't possible if there is a lock-in period. Some banks/lenders allow foreclosure after six months while.

Foreclosure rules also include foreclosure charges that are important to note when clearing your debts or planning to repay the personal loan before time.

Advice 11: Check Your Current Liabilities:

It's ok if you are all set to get a personal loan. However, you must not forget about the ongoing liabilities you currently own. First-time personal loan borrowers might have ongoing EMIs that are already a part of their monthly budget.

It's essential to maintain a low debt-to-income ratio that will help you maintain your monthly budget without facing financial troubles. Understanding how a new loan will add a burden to your existing budget is essential to making an informed decision for your future.

E.g., You have a monthly income of Rs. 50,000 and have an ongoing home loan of EMI Rs 20,000. It means you are left with Rs 30,000 for saving and expenses. Here you have a debt-to-income ratio of 40%, higher than the recommended margin of 30%.

In this case, applying for a personal loan won't be recommended as it will increase the debt-to-income ratio, making your finance management tough.

Advice 12: Read the Contract Thoroughly

You will require signing multiple documents when you reach the final documentation process of getting your first-ever personal loan. Undoubtedly, that will become a mess; hence, most of you opt to sign them without a detailed check. That's not recommended to anyone!

Before you sign the document, read every page of the contract thoroughly and grant your approval only after you are satisfied with the Terms and Conditions. You must ensure that you are aware of everything written in the contract.

Advice 13: Take a Personal Loan at Early Age

It looks weird, but financial experts always recommend getting a personal loan at a young age. Most lenders/banks are always interested in disbursing loans to young people as they have a high potential to repay on time and have started their professional journey.

This also gives you enough time to build credit scores and better understand budgeting.

That said, all first-time personal loan borrowers must read the advice given above. These recommendations will help you a lot in getting the right personal loan for your need and repaying it on time; without undergoing mental stress.

For more on how to get a personal loan without CIBIL score, click this link.