Want to be a smart borrower? Follow these 6 golden rules

People often need a loan for multiple reasons such as buying a home or a vehicle, wedding or meeting emergency medical expenses. But often loans applications get rejected for multiple reasons like low credit score, past repayment history etc. However, the rejections might be resolved by providing additional information and meeting the requirements of a lender. If you are tired of facing rejections for your loan application, then a few technical issues can perhaps be fixed and you can be a smart borrower. Money9 gives you top six tips to make yourself a smart borrower.

Good credit score

Good credit score is the most important things of getting a loan smoothly. So always try to maintain a good credit score. A sound credit score completes half the job. Credit score comprises your repayment history, existing liabilities, your income, credit cards and credit utilisation ratio.

A credit score of 750 or higher is considered ideal. Banks feel that an individual having a low credit score won’t be able to repay the debt in future. Hence, if your credit score is low, try to increase it. Paying all bills in time is one of the ways to get a good credit score.

Avoid multiple requests

Most experts feel that filing for multiple loan applications simultaneously dims your chance of getting a loan. If you file multiple applications to various lenders, it sends out the message that the applicant is desperate and looking for a loan at any cost.

It also creates a bad image of the applicant’s financial situation. It might even affect your credit score and also the chance of getting a loan.

Borrowing amount

Do not borrow more than what you need and what you can repay. Ensure your overall EMI outgo does not exceed 50% of your monthly income. If you want to find out what your EMI outgo should be, you could use an EMI calculator to find out the amount you can pay. Then proceed to apply for a loan.

Delay in payments

Try to pay EMI or monthly instalments regularly to avoid any negative consequences. The penalty or extra interest in case of delays can become big. Missing payments on time might not seem to be a big deal but it impacts your credit score directly and spoils your chances of getting a fresh loan in future.

Go for secured loan

Try to go for a secured loan as far as possible. You can also settle for gold loan or loan against property or security, as the credit score has less impact in such cases. Besides, the interest rate is also a bit low. If collaterals are offered, lenders accept applications ore easily as they feel secured.

Compare before you borrow

Never make knee-jerk borrowing decisions. Always, spend some time in comparing various credit options and loan products available before making a final decision. For meeting financial goals such as buying a home or meeting emergency cash needs, visit multiple banks and go for the cheapest rate.