Loans are ubiquitous in our history textbooks, yet they seem as daunting as they did at their inception. Since we are in the age of mass manufacturing goods, to afford them, we often need to take loans.
We have home loans, car loans, business loans, education loans etc. Since the banking sector is so organized, you can get a fair idea about your eligibility for a loan. You can check your credit score and debt to income ratio online; this will give you a fair idea of your ability to return the loaned money, and that’s all the banks need to approve your loan.
Types of Loans:
- Secure Loans: In this type of loan, the borrower has to submit an asset as collateral to get the loan approved.
- Gold Loans are an excellent example; by submitting the assets as collateral, the lender can sell the collateral in order to complete the borrowed sum of money. This case is usually applicable to large sums of money, like car loans or home loans. The eligibility for this loan is determined by the credit score.
- Unsecured loans: these are usually for smaller sums of money and don’t need any collateral. They have higher interest rates than secured loan. Example: credit card, personal loan, bank overdraft. Approval of loan is based on your credit score.
- Demand: Demand loans are for short periods of time and don’t have a fixed date of repayment. They are based on floating rate of interest i.e. the rate depends on the primary leading rate.
- Subsidized Loans: This is a type of load which has a direct or indirect subsidy. For example education loans, education loans don’t have interest rates in the US.
- Congressional Loan: AKA soft loan is a loan taken on a lesser rate of interest than the market or grace periods. These are the kinds of loans among nations.
S Steps to Getting a Fully Approved Loan:
· First and foremost you need to check your credit rating. Your credit rating is your ability to pay back the money you borrowed. The Credit Information Bureau of India Limited (CIBIL) states that a minimum score of 700 is required to get a loan approved.
· Secondly, calculate your debt to income ratio, meaning that you should have enough money to pay the EMIs. The ratio should not exceed 40%. When calculating your debt to income ratio, keep in mind all the monthly expenditure like taxes, fees, and insurance premiums. You should have some money left to pay your loan instalments.
· Now that you know that you can pay off the loan amount, you must check the eligibility criteria. With different kinds of loan, you will have to go through the eligibility criteria for each of them.
For Example Home Loan Eligibility:Minimum age of the borrower is 21 Years:
1. Maximum age to repay is 60 years
2. A minimum income varying from 5-7 lacks is necessary
3. A good credit score should be maintained
4. A person should have sufficient income to pay the standard EMI so that banks can provide loans upto 75-80% of the cost of property, i.e., debt to income ratio.
- · The most important thing that a bank looks for is your ability to pay off the loan that you took. Hence after checking your score and debt to income ratio, you are just a few formalities away from a fully approved loan. You need to have all the proper paperwork in order to receive the loan.
