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Getting that Bank Loan Is Not Easy

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Personal Loans are usually unsecured by any collateral and are extended for small amounts to meet urgent payments. You can consider the credit card with an approved drawing limit as  kind of personal loan, but it will be extremely high interest bearing. Traditionally, bank personal loans have been considered as the safest bet because they charge lower interest, but qualifying for such a loan is never easy as you need to be strong in income, credit rating and debt payment.

The first thing you need to do is to pull a copy of your credit report from one of the top three credit rating agencies. From this you will obtain your FICO score that usually ranges from 350 points to 850 points, which becomes a ready reckoner of your credit bankingworthiness. This is crucial to getting bank approvals for personal loans, and higher ratings for you translate into lower interest rates on your loans.

A FICO score of at least 720 places you in the upper bracket for becoming eligible for a personal loan, and any score below that will get you rejected. If there are any loans that are falling behind in repayments it is better to get them regularized and your report updated before applying the bank personal loan. Similarly, if there are garnishee orders, liens and judgments they need to be vacated. When it comes to revolving lines of credit like credit cards and overdraft limits, which don’t have fixed installment payments, take care to keep their utilization well within approved limits. The banker’s assessment will be favorable if there is a safe margin between level of your debt and your approved or eligible loan limits. The banker will assess the credit report thoroughly and give preference only to clients having the best credit ratings.

Another factor a banker assesses is your debt-to-income or DTI ratio. This is the percentage of your gross income from all sources that is used up for servicing your debts. Obviously, the lower this ratio the more stable you become financially. Ideally, the DTI ought to be 30% but any percentage above 40% is likely to disqualify you from taking the bank personal loan.

In appraising your credit portfolio the banker will also consider how long you have remained in your present job (sign of financial stability), how well you have serviced your mortgage and car loans (debt servicing capacity), and the utilization of unsecured facilities like credit cards, to assess how strong is your sense of fiscal responsibility.

Obviously, it is not a cake walk applying for a bank personal loan and the credit appraisal formalities are too tight for most people to make it past the front doors of these banks. Bad credit is the single biggest common denominator that accounts for maximum rejections. Rectifying the credit report may not be a workable option for many cash strapped families on the lookout for urgent cash. What makes the bank personal loan attractive to consumers in the first place is definitely the lower interest rate, but there may be other alternatives that promise a better deal, at least for those sections of society that are mired in bad debt.

One such option is the humble loan for vehicle title. The cash loan for title completely spares you the ignominy of being dragged through a detailed credit appraisal system that revolves around your poor rating. Credit checks and ratings are not a part of the auto collateral loan. The pawn car title loan will promise you at least 60% of the top dollar value of your vehicle, which means substantial cash in your hands within minutes. Because the title lender is so accommodating and is taking on far greater risks than a banker he would be justified in charging a higher but quite reasonable interest rate of 25% APR, but the fast car title loan compensates that by relaxing the terms of repayment. The car equity loan comes to you with bare minimum formalities and minus any hassles. They are far better options than payday loans and pawn loans, and offer repayment schedules matching bank loans.

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