Ensuring the credibility of your loan approval process

Aug 2018 | Team Rubique

When the entire concept of lending and borrowing started to become legal and mainstream, it only involved the traditional banking methodologies with fiat currency. As technology has evolved, there are now multiple avenues to apply for any kind of loan from various types of financial institutions and lending companies. Institutions like NBFCs, FinTech companies, and P2P companies offer different types of loans, which are so flexible that most nationalized banks might not approve of them.

The traditional system involves plenty of time and paperwork, which makes it all the more tedious for the borrower. With technological advancements, the process of applying for loans has become simpler and hassle-free.
Customers are now looking at alternatives to apply for loans, which aren’t as complex and time-consuming. Here are a few things you will have to keep in mind before applying for a new loan.

1) What kind of loan do you need?

Before even applying for the loan online, it is important that you know completely about your financial needs. It helps to sit down and gather as much information as you can about the various kinds of loan and their procedures. The options include:
• Business Loan
• Vehicle Loan
• Education Loan
• Property Loan
• Personal Loan

It is also essential to keep the interest rates and deadlines in mind before choosing a loan policy.

2) Credit history

If you have a previous record of using credit cards or an old loan, you should keep in mind that the financial companies and lenders will review this history, to assess your creditworthiness. Metrics like the history of your previous loans, how regularly they were paid, outstanding dues, cheques, and account statements will be thoroughly checked by the banks and lenders to adjudge if you can repay the fresh loan amount within the stipulated time.
The creditworthiness score often called the CIBIL score, will decide if the lending companies will offer you a fresh loan.

3) Proof of income and Collateral

A collateral is nothing but an asset that is submitted for security or assurance on the condition that it can be seized if the loan amount is not paid on time. A collateral is usually asked for, in case of a business loan or an education loan.
A collateral can be proof of investment in life insurance, mutual funds, stocks, properties, and bank deposits. You will also have to submit your source of income so that banks can gain a fair amount of trust on you that you will be able to repay the amount within the prescribed time period.

4) Bad credit history and poor CIBIL score

Assuming that you did not pay the previous loan amounts within the given time, or if you have not paid your credit card dues on time, it will have a direct effect on your CIBIL score. As the CIBIL score helps the lenders decide if you can be trusted with the fresh loan amount or a new credit card, you will have to pay your dues and outstanding balances on time. Even if you pay your monthly dues on time, it has to be noted that any pending outstanding balance is also paid.

5) No new credit cards during the loan process

A debt-to-income (DTI) ratio is something that explains to the bank your capacity to pay your monthly dues. For this ratio to be stable, it is important that you do not apply for any fresh credit cards during the process of this loan application. Every new credit card will add up to your credit report and subsequently have an effect on your CIBIL score. However, in the case of an emergency, you will have to submit an explanation to the lending party, as to why you are availing a new credit card.

6) The submission

These days, several websites and platforms that offer loans are made flexible, in order to make the entire process as simple as possible for you. You can fill up the application form online in your own time without having to submit any hard copies. Since it is online, the submission procedure is instantaneous and does not ask you to enter the same information again. However, if you need to edit a submitted application form, it can be requested for and you can make the necessary changes accordingly.

Informing the bank about your financial updates

More often than not, borrowers grow impatient over the amount of time it takes for an approval of loan application. And hence, they tend to reach out to multiple banks for loans or credit cards. In the end, it all boils down to intimating your lending company of any updates and changes about your financial assets and income sources.
Even if you are switching jobs and are moving to a larger income, it is recommended that you inform the lender of the same. With every update, the lender will require time to verify the records and assess your updated financial information. It is equally important that the lending company understands how stable your new paycheck is going to be, which is dependent on your new job.

It not only helps the lender update the records accordingly but also adds to the trust that exists between the lender and the borrower.