What Factors do Lenders Consider When Approving Loans?

Banks and NBFCs offer all kinds of loans to their customers- personal loans, home loans, business loans, etc. However, irrespective of the nature of a loan or its size, there is always some level of risk when it’s approved by a loan officer. This is why the banks consider several factors when someone applies for a loan. These are:

1. Credit Score

In case you don’t know, getting a loan for low Cibil score can be a herculean task. This is because credit score is the most important thing that a bank checks when it evaluates a loan application.

Your credit score signifies your creditworthiness. So, the higher is the score, the more you are “worthy” of receiving credit. This is because the score itself is calculated on factors like your repayment history, existing debt, credit utilization ratio, etc. If you have paid other loans in the past on time and without defaulting with any, then your score will be high, and it will let the bank know that you can be trusted with a new loan.

If you don’t know what your existing credit score is, then you can download your credit report online which can tell you the score and other important details as well which include your repayment history about loan EMIs and credit card bills, number of loan inquiries made recently, etc. You may also qualify for a free Cibil report if you didn’t download the report this year earlier. This is because as the per the norms of the central bank, all credit rating agencies are required to provide one free report to each user every year.

2. Income

You can’t take a massive loan with EMI of Rs. 30,000, when you are earning 40,000 a month. In other words, your income should be high enough to accommodate the EMIs of the loan you are interested in and also have room for your household expenses. There should be enough margin between the EMI and income so that the bank can have the assurance that you can easily pay the EMIs even if there is a financial emergency and you need to spend a portion of your income for that.

3. Debt-to-Income Ratio

If you are already repaying a loan, then the same is also taken into consideration during the analysis of your loan application through debt-to-income ratio which is self-explanatory. Again, this has to do with basic logic. If you are already paying the EMis of two loans and your income is just high enough to accommodate them and your expenses, then there won’t be room for another EMI. So, a bank won’t approve a loan knowing that you are earning barely enough to get by. You can find all the details regaring this in your free Cibil report.

4. Repayment History

When a bank approves a loan, they want the borrower to pay it back on time. This is because it’s not just about one borrower- there are hundreds of them in their portfolio. This is why if there are a large number of borrowers that delay payments, then it can affect the cash flow of the entire institution. So, the banks check the credit report of applicants to ensure that they have paid most of the EMIs, if not all, on time without delays. This is the reason why it’s so difficult to get a loan for low CIbil score and you have to take personal finance seriously to be financially secure.

5. Assets

If you own assets like stocks, real estate, jewelry, then you can get a loan by offering them as collateral. When you get a loan under this arrangement, then it’s called a secured loan for obvious reasons. In fact, a secured loan is easy to get compared to traditional loans as the bank can sell off the assets in case the borrower is unable to repay the loan. So, it’s easier for them to approve the loans. That said, these loans are risky for the borrowers because if you are unable to pay the loans, then you can lose your prized possessions.

So, these were some of the factors that lenders consider when they check loan applications. Do note that your credit rating is the most important factor here. So, make sure that you increase it as much as possible before you send the application.

Let’s find out interesting facts about credit score that you didn’t know

Credit score itself is an interesting topic. The whole logic, algorithm, how is it calculated, what factors are associated with it. All becomes one big score that is required to check the creditworthiness of an individual when he or she has applied for a loan or credit card to either the banks or the NBFCs (Non-banking Financial Institutions). For the basics, A Credit Score is a three digit number ranging between 300-900. Where 300 is the lowest and 900 is the highest. The score between 750-900 is a good score. Between 600-750 is considered as an average score and anything below 600 is bad.

There are four credit bureaus in India who gives credit scores. CIBIL (Credit Information Bureau India Limited), Experian, Equifax and CRIF Highmark are these four bureaus. These credit bureaus have the authority to access an individual’s credit history as they have the communication channel set with the banks and NBFCs (Non Banking Financial Institutions) who passes the information of when was the loan or a credit was applied to when it was approved to when it was disbursed and finally when they do they start repaying. Any missed or delayed payments, are all recorded and obviously which affect the score!

Payment History, Amount Owed, Credit Mix, Length Of Credit History and New Accounts are the five factors of which the credit score is made! We all know that. We have read many times about these criteria or the parameters and how they can make or break the score. The free CIBIL Score that is offered also helps anyone know the score and a detailed report wherein one can check the mishaps that must have happened if the score has gone low or anything related. But let’s know a few things beyond that. And what are other factors that one can take care too!

The first that comes is the credit utilization ratio:

What is the credit utilization ratio?

If you are a credit card user, you would know that there is a credit limit to the card which is assigned to you. Now, the credit limit given does not necessarily mean that use the whole of it. Practice shows that people who used a maximum 35% to 40% of their credit limit of the credit card, helped them keeping the score batter and on an average increasing the score. The logic is that it shows that the user is not credited hungry and is responsible enough to use some amount of the credit available. In such a case, if your utilization is high, try and get one more card and manage the balance or you can always clear the outstanding and revive the credit limit.

Secured Loans:

Secured loans or secured credits gives the financial institutes an idea that there always is a backup just in case if there is an emergency and you may just not be able to pay off the loan. A Car loan, Gold loan are some such small amount example of loans and secured credit card which is obtained against the FD that is kept to get that credit card are some of few hacks and tricks you can follow to get a better score.

Investing in something and from the interest received, pay the EMIs:

Now, this is one very interesting concept. Say you have X amount of money with you. If you are buying a home or a car or want to go for higher education or maybe send your kids for the education if you are that age, keep that amount as an investment. Take a loan for the work and manage in such a way that from the interest received from that investments, you can pay the EMI of a loan. In such manner, you can have the money safe, invested and with a new loan account, all the factors of the credit score are also covered helping you increase the score!

Follow these simple interesting hacks related to credit score which you probably didn’t know!

Smart investment tips to buy a Property

Planning is the key to everything we do in life. If you have a goal in life, be it short term or a long term, a proper plan can help you achieve it. Speaking about plans, we happen to have a lot of dreams which we would like to achieve someday or the other. Dreams like buying a high end car, an expensive phone, shopping for branded clothes, etc. These are dreams which you can fulfill with a small amount of planning and management and there you go! Dreams fulfilled! Is this the case with every purchase in our life?

Here we are talking about buying a home. Buying a house is a very lengthy process and takes a lot of your attention. For many of us, it’s a luxury we cannot afford. In some cases, by the time we reach to a decision to buy a house, the property becomes expensive or else the funds get exhausted. There is something or the other stopping you to make your dream purchase. For buying a property you need a proper plan which includes your budget, place of property, is there a co-borrower you can count on? Home loan options, you need to do a thorough research on which lender would be the best as it’s a long term commitment when it comes to home loans. HDFC Home loan gives you the best interest rates and less processing fees with speedy approvals.

After all the necessary research done by you, you decide on a property and start making the necessary arrangements to purchase the house. The very first thing in the home buying process is to make a huge down payment. You are prepared for it, but at last moment there are some additional charges and without digging a huge hole in your pocket you won’t be able to make the purchase. This leads to dropping the plan and again you are at ground zero.

It’s a total nightmare to see your dream property slipping out of your hands. Now you think you must have started making some smart investment for such a day. Thinking to start making smart investments, we will show you how,

Start early

Buying a house is almost everyone’s dream. Find you calling at the earliest and start saving for a good down payment for the house. On the other hand, if you apply for a loan at the early ages let’s say in your 20s and 30s, the bank will give you maximum loan amount with long tenure up to 30 years. By doing this you may end up paying very less down payment.

Start fixed deposits and recurring deposits

This may look funny, but this helps a lot. We happen to spend a lot on unwanted things and end up having no savings for future. By opening deposit accounts, you can start saving a lot of money. This way, you can minimize your spends and start saving for the deposit account. This savings then helps you make a huge initial payment if needed.

Invest in SIP Mutual funds

This is one more thing you can do to save money to buy a house. SIPs promise you a good return between 10-18% returns depending on which type of fund you are selecting and the tenure associated to it.

Start working on your credit score

The most important thing when it comes to buying a house is that you will need financial aid from a bank or a home loan lender. Make sure to have a good cibil score before you apply for a loan to get the maximum out of a loan buying process.

Every step you take to buy a house gets you one step closer. Just make sure the steps you take will help you in the long run as this is a long term commitment and you need to prepare for the same.

Application Checklist for you before Taking A Loan

Personal loan is a very convenient way of borrowing money from banks and NBFCs to meet any immediate financial need. The process is extremely fast and simple provided you have all the documents required in order. Since personal loans are unsecured, banks need to ascertain the credit risk associated with the borrower before sanctioning the loan. They approve of a certain loan amount depending upon the repayment capacity of the borrower. They require you to submit proof of income and some other important documents to ascertain your eligibility for the loan.

There are some important things that one must take care of before applying for a personal loan. Here is an application checklist that will guide you if you are availing for the personal loan for the first time.

Checking the credit score

Since banks use your credit score to determine your eligibility for the loan, it is a good practice to check your score yourself first to know your chances of approval. Order your free credit report from any of the three credit rating agencies to analyse your credit standing. Having an excellent score helps in instilling confidence in the lenders and bargain for an attractive rate of interest. However, if you don’t have a very good score you can opt for personal loan without CIBIL score that are available at exorbitant interest rates.

Finding the Eligibility criteria

Different lenders take into consideration different factors to ascertain a person’s eligibility for the loan. Find out the eligibility criteria of the specific lender with whom you wish to apply for the loan. Check the parameters like age, occupation, income and credit score before proceeding with the application. Get a list of documents required so that you have all the relevant paper work when you apply for the loan.

List of required Documents

Contact your lender and get a checklist of the documents that you need to submit along with your application. The requirements of the documents vary based on the profession, income and loan requirements. However there are some common documents that you must have in handy. For an ICICI Personal loan you may require

1. Valid Proof of identity- A copy of passport, PAN Card, Voter Id Card or driving licence serve0s as a proof.

2. Proof of address – Copy of passport, Aadhaar card, rental agreement, utility bill, ratio card.

3. Proof of Age

4. Financial documents

• For salaried employees- Bank statement for last 6 months, Salary slips of last 3 months, Form 16 for last 2 years, Employment certificate or appointment letter

• For self-employed Individuals- Bank statements of savings and current account, proof of office address, ownership proof, Income tax returns of last 2 years, detailed financial audit including Profit and Loss statement and Balance sheet. Since the source of income of self-employed individuals is riskier than that of salaried individuals, these documents help in providing an assurance to the bank that they have a steady inflow of funds.

5. Passport size photograph

Since personal loan is unsecured in nature, the lender verifies the documents thoroughly to make sure that the borrower has the capacity to repay the loan.

Interest rate charged

The rate of interest determines your monthly EMI on the loan. Find out the best rate that you can get. Also look at the processing fees, late payment charges, prepayment fee etc. It is important to have a clear understanding of these charges before you apply for the loan.

Repayment plan

Use the EMI calculator to plan your repayment in advance and choose a tenure that suits your budget. Take into consideration any major changes in your income or expenses that you expect in near future. Being realistic helps in avoiding any future defaults on loan that may adversely affect your CIBIL score.

Taking care of this essential checklist will ensure that you get approved for a personal loan at good terms and rate of interest.

How fast can my credit score increase

We area unit in associate degree ear wherever everything that we wish is instant. Instant is nice. however, it creates a great deal of hysteria, impulse, and impatience. Everything instant isn’t smart. Despite obtaining the results timely, it’s continually not essentially good. There area unit several instances wherever the perfection or accuracy isn’t maintained at the speed of achieving it. whereas speaking over credit score and it’s the rate of accelerating or decreasing usually has several myths. Let’s get those busted. there’s no magic which will happen and would get your score to optimum nice over every day or month. Also, the speed of increase additionally depends on the score that is present. If the score is 450 and if the score is 650, positively the time needed to urge 750 that is taken into account optimum best, differs. The one that has 650 can take lesser time compared to the one that has 450.

CIBIL Score is very important & it is a three digit number which is determined by payment history, the amount owed, new credits, credit mix and length of credits. Where, 35% is comprised of payment history which means how one has been making payments over the tenure of credit accounts opened. Credit consists of the credit card usage and the loans taken. 30% is for the amount owed. The total amount that has been taken, I.e. the credit limit one has for the credit card and the loan amount taken also has a major role in making the credit score. Length of credit history is 15%. How long have been the credit accounts are open, is the factor that is also considered. Rest both, new credits, credit mix are given 10% each. New credits are the one which is applied. But, if there are multiple attempts for opening new credit accounts can drag the score down. As it makes the creditors think that one is in dire need of funds which is also called credit hungry behavior. Credit mix is the combination of a secured and unsecured type of credit along with the fixed and revolving type of credits. These are the parameters and the weight of them.

 Any mistakes in these parameters can state with the score. the main points data is mentioned within the CIBIL report. however long are the account open, however and once area unit the payments created, any defaults, lost or delayed payments area unit all mentioned within the report. Also, the inquiries created for applying the credit are mentioned. the primary score is established when half dozen months of a lively account. Then the score is updated almost every month. Credit utilization is also a factor which affects the score. This is specifically for credit cards. One should not use more than 35% – 40% of the total credit limit of the card one has. To increase the score, the first and the foremost thing which has to be done is rectifying the old mistakes. There may be any missed payments, default accounts, unpaid dues, etc. work on them. Talk to the banker, tell the issues you had. Try clearing all those first. Then, use your credit card upto 35% of its limit. If your usage is more, apply for a new card. And use the mix. As you apply for a new card, new credit factor is also considered. But yes, do not overdo! Try taking a secured loan, say a gold loan or secured credit card. This will be a good of credit mix as well.

Once this is achieved, make sure you do not miss any more payments or delay in payments. Organize the payments. Keep reminders. Do not miss the repayment dates. While you follow this practice for over few months, a good credit score is no far! Again, there can’t be any finite time that is calculated to get a 750 score, but it is always achievable if the above mentioned points are taken care of!

Things You Must Know About Top-Up Loans

Mr. Arora took a home loan with a 15-year tenure at an attractive interest rate. However, after 7 years he realized he felt the need of renovating his house. So, just like most people he thought a personal loan would be a good idea to cover the expenses and started looking for a good deal. Unfortunately, he couldn’t find a personal loan with an affordable interest rate even though he didn’t have a problem of a bad CIBIL score or bad credit history.

With the burden of this loan already on his shoulders, Mr. Arora desperately needed to arrange the funds for his home renovation in a way that it didn’t burn a hole in his pocket. This is when his friend told him about it.

What’s a Top Up Loan?

A top-up loan is a small loan you get on top of your primary loan- mainly a housing loan. The interest rate on a these loan is usually smaller than a full-fledged personal loan. Moreover, you can also enjoy tax benefits with a top-up loan.

The following are some of the things you must know about top-up loans:

1. Qualification

These loans have their benefits, but just because you are repaying a house loan, it doesn’t mean that you automatically qualify for them. Your lender will inquire about your reason for a it and will make a decision at their discretion.

The following are some of the good reasons:

• Medical expenses
• Home renovation
• Land purchasing
• Education expenses
• Business Expansion

2. Collateral

Since a top-up loan is provided on the basis of a primary loan i.e. a house loan you don’t need to provide security for the same. The bank uses the house as collateral. However, this means that even after you have repaid your loan you have to wait until you have repaid the top up loan as well to get back the rights to your house from your bank.

3. Interest Rate

The interest rate on a top-up loan is 1% to 2% higher than the housing loan. However, it’s still lower than most personal loans available. You may also get to pay a smaller processing fee.

4. Tax Benefits

If you are using it for acquire/renew/construct/ or repair a property then you are eligible for tax deductions on the amount paid for the principal amount and the amount paid for the interest on the loan as per Section 80C and Section 24 respectively.

Top-up Loans Conditions

Although the eligibility criteria for a varies from one bank to another, the following are some general conditions:

• You should be availing a home loan from the bank/ financial institution.
• Most banks require you to repay the home loan for 6 months to 12 months, or even more before you can apply. They do this to assess your repayment habits. Thus, you should not have a low CIBIL score or bad credit report. If that’s the case, you must take measures to CIBIL score before sending an application.
• The usual permissible loan amount is calculated on the following basis:

permissible amount= 70% to 80% of the market value of the property- loan balance

So, if your house is worth Rs. 50 lakhs in the market and the pending debt is Rs. 25 lakhs, then you can only get a maximum of Rs. 10- 12 lakhs through it.

• Many banks limit the tenure according to the outstanding term of your current loan. So, if your loan term ends in 9 years, then the maximum length of top up loan tenure would be 9 years.

If your credit history is good and you don’t need to improve CIBIL score then availing a top-up loan is an excellent option over others such as personal loans, etc. This is because the process of a top up loan is simple and easy. Moreover, you don’t have to offer another property as collateral with them.

Elements that Decide Approval of Personal Loan for Self-employed

When a self-employed individual applies for a Personal Loan to a bank or NBFC; the lender considers a few factors before approving the finance. The consideration for loan approval depends on the financial eligibility factors including age of the borrower, the reason for the advance and alike. Well, there is no denying the fact that credit score of the individual is one of the most important factors considered by the banks.

Critical Factors that Define Approval of Personal Loan for a Self-employed:

• Income Tax Returns:

First of all the bank would consider if you have filed your income tax returns on time or not. Lenders are exceedingly particular when it comes to Income Tax Returns (ITR) for a minimum of last three years of individuals approaching for a PL.

• Existence of the Business:

The time span of a business assures the lender about the reliability and sustainability. Your business duration actually ensures if you can pay back the loan in time. The stability of the business and your source of income is truly essential.

• Income and Profits:

If you are able to repay without defaulting is the primary concern of the lender. Your disposable earnings as a self-employed professional would help the lender to assess your capacity to repay the loan.

• Nature of the Business:

Some businesses could be unstable or rather seasonal. This definitely won’t give adequate assurance to the bank about your repayment ability every month. The kind of business, therefore, does play a vital role when you apply for a personal loan as a self-employed individual.

• End use of the fund

You need to declare the purpose of availing the loan. The bank judges if it is your actual need or just self-indulgence.

• Cibil score (Credit History):

When you approach a bank as a self-employed individual for personal loan they need to ensure if you are worthy of receiving credit or not. This worthiness depends on how good you are with your finances. If you have serviced loans successfully earlier; it confirms that you would be repaying the loan on time without missing payments. The process that banks and other financial institutions follow to know your credit worthiness is through your CIBIL (Credit Information Bureau Limited) score.

• Your age:

On age the factor, consideration may differ from lender to lender. A self-employed person should be within 25 to 65 years of age.

• Right Documents:

Never submit fake documents to the bank when you apply for a personal loan.

Now, while all these factors play a noteworthy role, whether a PL would be approved for a self employed, Cibil score (Credit History) turns out to be the crucial one.

So before applying for the loan it is important that you ensure that you have a good score.

What factors lower CIBIL Score?

• Too many Personal loans
• Missing loan installments
• Coming too close to the limit on credit cards
• Not paying credit cards back on time
• Not paying credit cards in full
• Too many rejected applications for loans/credit cards
• Settling credit cards

However if you have a low CIBIL score, you need to know how to get Personal loan for Low CIBIL score.

While the CIBIL data says 80 per cent of the loans that get sanctioned have a score higher than 750; nevertheless, the CIBIL score is not the only factor which lenders take into consideration while deciding and approving a Personal loan to a self-employed individual. A mainstream bank may ignore a credit card default in the past if you have a regular good income flow.  Your future financial prospects, demographics, education, socio-economic conditions may help you in getting a PL despite your low CIBIL score.

NBFCs (Non-banking financial Institutions) are relatively flexible with credit scores and the cut-offs as compared to banks. If you have a low credit score, you are advised to approach a NBFC instead of a mainstream bank.

You may choose to approach a Peer-to-peer (P2P) lending website. You may get a personal loan regardless of your low credit score.

If the cause for your low score is a failure to pay, it is suggested to clarify the lender why you had failed to pay. In case it was not an intentional default; lenders at times might excuse. If you have a convincing explanation with evidence say, you had a sudden loss in business or there was a medical emergency for which you couldn’t afford to pay back; put across clearly. If found authentic; the lender might consider.

All in all if you make plan thoughtfully you could easily grab the best deal!

How to enhance your loan eligibility

Every bank follows a credit appraisal process in order to determine a borrower’s loan eligibility. It checks the CIBIL score of an individual, and assesses the CIBIL report, income and other documents to determine whether the borrower is capable of repaying the loan on time or not. By working on the credit profile and improving credit score one can increase the chances of approval.

Here are some ways that can help you increase your loan eligibility.

Longer tenure of loan– Repayment capacity of the borrower is a major factor that banks consider before sanctioning a loan. If the monthly instalment is higher than what the bank thinks you can afford to pay, then your eligibility will be affected. Opting for a longer tenure will reduce your EMI liability and enhance your eligibility. Though a longer tenure will increase your net interest outgo it will at least make you eligible for the loan. 

Additional income-Showcasing that you have a high steady income helps to increase your loan eligibility. Keep a record of the variable perks or performance linked pay that you earn from your job and add them to your income. Mention the other sources of income such as high interest fixed deposits or rental income on the property that you own. Such additional sources of income will enhance your repayment capacity and increase the amount that you are eligible for. You may need to furnish supporting documents as proof of the additional income. So keep them handy.

Step-Up Loans- Step-Up loans are a great way to increase the loan eligibility. For people who are in a profession where there is struggle in the initial years, but surety of a good financial status going forward, this is an easy way to borrow funds. Here an individual pays a lower EMI in the initial years. The EMI progressively increases with the tenure of the loan. Here the eligibility increases as the future income is expected to increase as the borrower establishes himself in his profession.

Prepay-existing loans- If you are considering taking a home loan, then prepaying your outstanding loans like a car loan or a personal loan, is a good way to enhance your eligibility. The EMI that you are already paying on the existing loans reduces your monthly repayment capacity and impacts the home loan amount that you may be eligible for. For example if your monthly income is Rs 1 lakh, the bank may consider your repayment capability as Rs 50,000 as EMI. But if you already have a personal loan where the EMI is Rs 20,000 this will be deducted from the amount that you can afford. So to arrive at the eligible amount, the bank will consider your affordability as Rs 30,000. Hence it is advisable to prepay these loans before making a home loan commitment.

Co-borrower-The assessment of the repayment capacity of the borrower largely depends on his income.  The EMI is generally half the take home salary. But if it falls short of the required limit you can bring in a co-applicant. If your spouse is earning, then it is a good idea to make a joint application. Pooling two incomes together enhances the loan eligibility amount to a great extent. This also means that the liability of repaying rests on both the applicants.

 Work on your CIBIL score- CIBIL score is an important factor that determines loan eligibility. Hence you should make all efforts to improve credit score. Check your CIBIL report and score regularly. If you notice an errors then dispute them immediately. Pay your monthly instalments and credit card bills on time. Use your credit card wisely. By keeping the utilization levels below 30% of available credit limit you will ensure that you improve credit score.

When you work on the important aspects (like income and credit score) that the bank evaluates in order to make an assessment, you can surely enhance your loan eligibility.

 

What is P2P Lending? Why is it Trending?

For many decades banks were the only financial institutions that offered home loans, student loans, etc.  on a commercial basis. Then gradually NBFSs (Non Banking Finance Companies) such as Fullerton Credit, Muthoot Finance, Bajaj Finserv. etc emerged. However, as cases of loan defaulting started to become more and more frequent, and the interest rates went high, people began to look for alternative solutions that could be easy on the pocket, and also easily accessible. This was accomplished by P2P lending, which is catching up quickly in India.

What is P2P lending?

P2P lending stands for Peer 2 (to) Peer lending. It is the ultimate urbanisation of loaning and financing, as it offers an easily accessible, fast, and simple solutions for all your loaning needs.

To get a P2P loan you can choose any P2P marketplace that is available on the Internet, check if you meet the eligibility criteria, upload a few necessary documents, and if your application goes through you can get the money within 24-48 hours, typically.

What are the Advantages of P2P Lending?

P2P has numerous advantages over traditional loaning options, which is the reason why it is quickly becoming the most preferred choice for loan seekers.

Here are some of the best advantages of P2P lending:

Accessibility: One of the biggest problems we had with traditional loans was accessibility. To get a loan a person had to go to a bank in person, and submit an application for the same. If there was a holiday then the person would even need to wait till the banks opened. P2P lending has solved the problem successfully by allowing users to apply for loans on the Internet. No matter where you are, and what time is it, you can easily apply for a loan from your laptop or a smart phone.

Faster Release of Funds: With a P2P loan you can get your loan amount within a day or two after verification of your documents. This was much needed, as banks, and even NBFCs, take a much longer time for funds disbursal, that too if your loan gets approved.

Easier Obtainment- To get a loan from a bank or NBFC you have to have a good CIBIL score, and a decent, if not impressive, credit history. This is why a number of people who didn’t meet these requirements have to struggle and spend a long time applying for a loan in multiple banks. But this was a thing of yesterday. Today, you can get a P2P loan even if your credit score is below average. P2P lenders are more forgiving than banks, and you have a far greater chances of securing a loan from them than any traditional lender.

Flexibility- P2P lending also offers you a lot of flexibility in terms of loan repayment. You are free to shape the payment structure for your loan, and choose the duration, and the number of instalments. Usually you also get attractive interest rates, which are way lower than standard rates offered by banks.

How is P2P Lending Changing the Banking Industry in India?

Even though P2P has been existing, and rather popular, in first world countries such as UK and USA, it is still quite new to India. However, it is trending fast, and it is estimated that by the year 2020 the entire P2P lending industry would be at Rs. 30,000 crores.

Considering the significance and value of P2P lending RBI has already extended its support towards it by releasing draft regulation guidelines that will ensure that both the borrowers and the lenders can be benefitted as much as possible.

What Does it Mean For You?

Not only P2P lending is here to stay, it is quite possible that it will dwarf the traditional loaning options banks have been offering so far. As more and more lenders are emerging you can expect competitive interest rates, and attractive schemes.

If you want to enjoy flexibility in loan repayment, best interest rates, quick access to funds, and faster loan approval then P2P lending is a really good option. You can easily compare various lenders online and settle for one that is most suitable for your requirements.

Why You Must Collect NOC (no objection certificate) After Paying a Loan

Getting a loan has become a lot easier today. People have become more careful towards their CIBL score, and credit report, which is why they are able to get their loan applications approved without any problems. So, whether you want to buy your dream car or dream house, now is as good a time as any. However, you may know a lot about how to get a personal loan or a home loan, but are you aware of the correct loan closure formalities? When you have paid back a loan in full, it is important to carry out the proper closing procedure, of which collecting an NOC is an integral part.

What is NOC for Loan Closure?

An NOC or No Objection Certificate is a legal document that can be used by you as a legal proof that you have paid all your outstanding dues to the lender successfully. An NOC carries your name, address, account number, and other relevant details. It also certifies that the lending institution (whether it is the bank of NBFC) no longer has any legal rights or claims over your collateral.

Why You Must Collect NOC Once You Have Paid a Loan

There are many reasons to collect your NOC from your lending institution, as it can have a huge impact on your financial health. Here are some pointers on the same that you need to consider:

• An NOC is essential for CIBIL to verify that you have successful repaid a loan. Failing to provide the certificate can lead to CIBIL score damage, as your credit report will continue to mark the loan as unpaid. This loss of credit score can limit your creditworthiness, and make getting a loan in the future difficult.
• If you decide to not collect the NOC from your lending institute then they may not record the closing of the loan in their files. Thus, after several years you may suddenly receive a letter from the institution asking you to pay the loan, which you have actually paid. This misunderstanding can lead to an unwanted headache, and wastage of time.
• Some banks are quite stringent with their procedures, and simply handling the misunderstanding may not be enough with them. They can take a legal action against you, and if you don’t have an NOC then there can be grim consequences.

Thus, there is no denying that collection of NOC is really important once you have repaid a loan. But how do you go about it? Here are some tips that can help you:

• When you have made the final payment for your loan, you can write a formal letter to your lender asking them to return all your documents that they have kept with them, necessary bank statements, etc. along with a NOC.
• Some banks and other financial institutions allow their customers to download their NOC document online. All you have to do is login to your account, select the document, and download it on your system.
• If you have taken a car loan then you will need an NOC as well as an RTO form (aka Form 35). You will need to submit them to your Regional Transport Office, as well to your insurance provider.
• If you have taken a home loan on a registered real estate property then you will need to go to your local Registrar of Properties office along with a representative from your lending institute to get the lien removed. Only then you can get the NOC.

No matter what kind of loan you have got, once you have repaid it you must get an NOC for the same. This is an important step of the loan procedure, and serves as a formal closure. Ignoring the same can lead to a lot of troubles, one of which is CIBIL score damage. Once this has happened it can take a lot of time and energy to improve credit score. It can also cause the financial institution to put your name on the loan defaulters list. Thus, make sure you ask your lender to provide an NOC as soon as you have made the last loan payment.