Personal loan: People take out personal loans when needed, and banks are eager to offer them. The number of personal loan borrowers in India is quite high. If you take out a personal loan, you need to understand the essentials. Failure to properly prepare for a personal loan can negatively impact your credit score.

Banks also consider several factors before granting a loan. Understanding these factors beforehand significantly increases your chances of securing a loan. Additionally, you have the opportunity to secure a loan with lower interest rates and better terms. Below are some important factors to consider before applying for a personal loan.

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Income and Job Stability: Important

Before granting a personal loan, banks assess whether your income is stable. This is due to the need to repay the loan. The higher your income, the greater your chances of securing a loan. Additionally, job stability also works in your favour, such as working with the same company for at least one or two years. If you are self-employed, you’ll need to demonstrate stable income from your business. This includes financial reports or tax returns.

Learn about your credit score or history.

Your credit history is a major factor in determining your chances of getting a loan. Generally, a score of 750 or higher is considered good. This means the bank understands that you’ve repaid previous loans on time.

If you’ve defaulted on a previous loan, delayed payments, or filed too many applications in a short period of time, things could go wrong. Therefore, you should monitor your credit score and correct any errors.

Loans and Responsibilities

You can also check how much of your income is already being invested in EMIs or credit cards. More than 40 per cent of your income is already tied up.