A loan is financial assistance which is taken from a lending party for a defined time period. One can borrow loans from friends, family, banks, financial institutions, NBFCs, digital lenders etc. The main aim of availing a loan is to meet the immediate financial emergency.
Till a few years ago people had very limited options when it came to obtaining loans in India. One had to either depend on friends and family which mostly resulted in spoiled relationships or they had to take money from the local lenders, who charged a really high amount of interest rate. The only logical option was to visit the traditional lenders however it came with several problems. Firstly, one had to pay multiple visits to their branches and it consumed a lot of business time. Secondly, the traditional lenders required a lot of physical documentation and thirdly, the asked for collaterals to evaluate the creditworthiness of the loans which was not mostly available with individual as well as the small businesses.
However, now with the use of advanced technology, one can apply directly through the online portals like that of LoansJagat, instead of physical visits to the banks. The loans can be availed for personal usage, buying a car, home, funding education, business needs etc. On the basis of this, the different loans available in India are:
- Home Loan
- Education Loan
- Car Loan
- Personal Loan
- Gold Loan
- Business Loan
- MUDRA Loan
- Agricultural loan for farmers
- CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises)
The loans are generally of two types-secured loans - secured loans and unsecured loans. The secured loans are ones wherein the applicant backs the loan with collateral or security which can be either any real estate property, asset, machinery, gold, deposits etc. Whereas unsecured loans are the ones wherein no collateral is involved. These loans are a preferred option for the borrower who are seeking a loan but don’t have any asset to be kept as security. Lenders usually approve the creditworthiness of the loan application backed by security more comfortably in comparison to the one without any collateral attachment. However, property assessment might take more time than an unsecured loan.
PROCESS OF APPLYING FOR A LOAN IN INDIA
One can apply for the loan either offline by visiting the bank personally or through online mediums. Online mode is more convenient and hassle-free. Whichever way you choose, it is important to keep the following points in mind:
- Calculate the actual amount you need: It is very important to calculate the correct loan amount to meet out the financial needs. The wrong estimation can be chaotic. If the loan applied is for a higher amount than required, then the applicant ends up paying more interest rate. And if the loan amount taken is less than what is required, then the whole purpose of taking the loan standstill as the purpose of taking the loan remains unfurnished.
- Credit score: Credit score is a reflection of your credit history and your financial credibility. It is one important factor which the lenders take into consideration. A good credit score ensures a higher loan amount whereas a poor credit score may sometimes result in rejection of the loan application. Thus, it is very important to check the credit score before taking a loan.
- Choose the right loan and lender: It is crucial for the borrower to do prior research about the various lenders offering the loan product and compare them on grounds of the rate of interest, loan terms and conditions etc. LoansJagat which is India’s leading loan enabler offers an excellent platform wherein the lender can compare the details of the loan offered by different lenders and choose the one which best suits their needs.
Once you are sorted with the above-given points, you can apply for the chosen loan either through online website of the bank or through LoansJagat portal or offline by physically visiting the bank and filling the application form there.
The online loan application is easier and more convenient to do. One can fill in the application form, submit the documents online itself and wait for the loan to get approved. The whole process can be done through the comfort of one’s home without having to visit any bank or NBFC. Some key advantages of online loan application are:
- Quick approval: Online loan applications are processed instantly and the applicant gets the status immediately. After approval of the loan, the loan amount is also disbursed quickly in the bank account.
- More secure: Online mode lets the applicant track the loan application process. One can check the status of processing from time to time.
- Better rate of interest: Usually, online modes have lower service charges and fees and may also give a better deal in terms of the interest rate.
- Comparison can be done easily: By applying through LoansJagat online, the applicant gets to compare different lenders for their offerings. This opens up various options for the applicant and he can choose the lender which best suits his needs.
- Fast and less cumbersome: The online mode is fast and hassle-free and gives the applicants a lot of conveniences.
KEY FACTORS WHICH ARE NECESSARY FOR LOAN APPLICATION
Before applying for the loan, the applicant must fulfil the below-given factors:
- Financial stability: Lenders undertake the financial stability of the applicant by checking their employment status and work experience.
- Employment stability: Almost all lenders seek the employment stability of the loan applicant. They usually seek a minimum of a 1-year continuous job at one place. The lenders consider it as an important eligibility criterion as they want to be sure of repayment of the borrowed amount.
- Age of applicant: Age is one key eligibility criteria when it comes to availing loans. Usually, banks and other financial institutions offer loans to people in the age group of 21 years to 60 years. Younger individuals are more likely to get a loan approved faster.
- Credit Score: Almost all lenders want a credible borrower. The credit bureau score determines the financial credibility of the applicant. It is one key factor which is taken into account by the lenders before approving the loan. A higher score over 650 is usually preferred by the lenders.
SIGNIFICANCE OF CREDIT SCORE FOR LOAN
Credit Bureau Score is one important aspect of eligibility criteria of loans in India. Though different lenders have different guidelines of approving the loan, usually CIBIL score is one sought after parameter. Lenders readily and willingly approve the loan application of applicants with a higher credit score. But this does not mean that the applicants with lower Credit score cannot avail a loan. Some lenders and financial institutions offer loan to individuals with a poor credit score with a higher interest rate. It depends and varies from lender to lender. Repaying the loan on time with regular EMIs enhances your credibility and your credit score. So, if you take a loan, be committed to pay back the monthly instalments on time.