Unlike a specific loan that is a loan for a house, or an auto loan, which must be spent on a vehicle, personal loans can be used for almost anything.

Steps to get the personal loan

When should you go in for a personal loan?

Sometimes, you might have a large or unexpected one-time expense that you might be able to fund on your income like a child’s wedding, or house renovation or even a vacation. At these times, it is advisable to apply for a personal loan to overcome this temporary shortfall. We are going, to be honest; getting a personal loan isn’t easy. There are a lot of things you need to consider before you apply for a personal loan.

Types of Personal Loans

Next, we need to understand how personal loans works, there are two main types of personal loans, secured and unsecured.
A secured loan will usually give you lower interest rates, but you have to put something up as collateral for the loan, which means that if you don’t pay back the loan, they take your collateral.
Unsecured loans, these loans don’t require any collateral but will have higher interest rates. Banks in Pakistan providing unsecured loans are, Alfalah Bank, Faysal Bank, Dubai Islamic Bank, etc

Only Apply for What You Need

The first, and most obvious, is to decide how large a loan you actually need. This might seem like a ridiculous tip to include, but it’s important enough to reiterate. Before you apply for your loan, sit down and calculate how much money you will need.
From a lenders perspective, there is naturally a greater degree of risk attached to lending someone PKR25, 00,000 than there is to lending someone PKR50, 000, if all other credit factors are equal.
While you may only need PKR50, 000, you may also feel that it’d be great to have some extra cash left over to buy something else, treat yourself, or have a holiday.
However, depending on your profile, the extra borrowing may be the difference between being accepted and being declined.

Do not make multiple loan applications

It is tempting to apply to several banks/lenders at the same time in order to maximize your chances of being approved by at least one lender. This is not a good idea, When you do this, potential lenders get the feeling that you are ‘hungry’ for loan and need to apply to several sources to fund your expenses. Moreover, too many loan applications without corresponding approvals can lead to a drop in your credit score. Make sure you only apply to the place where you have the best chance of being approved.

Improve your chances to get better loan Conditions
You can improve your chances of getting approval for loans by:

Lower your debt: Stop spending on credit cards and come up with a strategy for paying down your balances.
Pay your bills on time: As much as 35 percent of your consumer profile is based on your payment history so make sure you pay all of your bills on time. If you are forgetful, set up automatic payments or monthly reminders.
Don’t close your unused credit card accounts: Unless your credit cards carry expensive annual fees, there’s no real benefit to closing them even if you aren’t using them. Your credit score will take into account the average length of time you’ve been using credit, so holding an account for a long time could actually benefit your score and will help you increase your chances for your loan approval.
Don’t open new credit: As you rein back your spending, avoid the temptation to apply for more credit cards. Lenders may consider you risky if you open a lot of new accounts in a short amount of time.

Be Honest

A large part of our eligibility criteria relies on the honesty of the potential applicant. Being dishonest or providing misinformation could damage a person’s chances of being successful when it comes to the credit checking and verification stage.
Provide information that is accurate throughout the application process. If you are honest but you are not successful, It will also help you take the steps you need in order to be seen as a responsible borrower.
If you are dishonest in your application, this could then lead to your application being declined, which will ultimately hinder your chances of securing loans from lenders in the future.

Research online and offline personal loan vendors up front BEFORE applying for a loan

Because each credit inquiry impacts your credit, the more banks that check your credit, the lower your score goes. Check the banks according to your financial standing, regarding which bank would be more interested to lend you looking at your financial profile and after a thorough research apply to that bank so that your chances to get an approval are better.

Don’t Apply for Fresh Loans without Paying off One

Lenders prefer individuals who are free from current debts. The probability of successful loan repayment deepens if borrowers have the previous history of successful repayments.

You may not qualify for a personal loan the first time you apply, but it is possible to improve your financial position and successfully qualify later.
You can apply for a loan again after you fulfil the criteria of the lending institutions, by meeting the eligibility criteria, decent credit history, and pay attention to your debt-to-income ratio and other things important to get the personal loan approved.
Also, make sure that you have been in the same job or company for at least six months before you apply. Banks want to see stable employment and a steady source of income so that you are able to make all your loan repayments on time. In the case of a personal loan, your income is very important as the banks do not have any collateral in case you default on your payments. If you have been changing jobs frequently, there is a good chance that your application will be rejected.
Once you understand the basics, you should spend some time researching the different loan types, examining which might work best for you. There are several different ways to get a personal loan, and not every type will be a good fit for your situation. Fully understand the type of loan you are getting, the loan period, the payment methods, payment amounts, and any other important information.

Khurram Zahid

The post 5 Tips to get your Personal Loan Approved appeared first on Smartchoice.pk.

Meet eCIB
But before you can avail any of these services, you have to apply for them and then you are subject to certain checks only after which you are granted a new credit card or a personal loan. This is exactly where Electronic Credit Investigation Beaurau or eCIB comes into play. eCIB is a regulatory authority set up by State Bank of Pakistan, SBP. What this authotity does is maintain a database of all creditors from all financial institutions in the country. For all banks and other financial institutions it is mandatory to upload creditor’s details including all negative as well as positive aspect of any creditor’s history such as late payments, clean history, settlements, defaults etc. Based on the information provided by the financial institute, the eCIB prepares a report known as eCIB report or more commonly credit report. This report however doesn’t contain any grading or rating.  The report also includes your personal information such as your CNIC number, address, date of birth, name and other relevant details.

How Does A Bank Use The eCIB Report?
Each bank has a different set of criterion to gauge whether an individual’s request for a personal loan or a new credit card should be approved. There are different threshold and risk levels that a bank might have. For e.g where one bank might choose to refuse your request on a single delayed payment, another one could’ve a risk level of upto 3 delayed payments in your credit history before you can be refused for a financial service’s approval. Also there are different things that are taken into consideration while offering you a specific amount of loan or a credit card with a certain credit limit. It could also be the status of your current due payments on other loans you might have taken or if you have one or more credit cards already then your outstanding amount could also be taken into consideration before issuing you a new one. For example, you took a loan of 70,000 for 1 year with a monthly repayment schedule  but failed to pay 3 installments on time within the monthly due date. These late payments along with the full history of your payment schedule will be mentioned in the eCIB report making it easier for banks to gauge if you can be allowed to borrow further money or not. On the other hand, it can also reflect your positive status of timely payments on previous financial borrowing services and approve your request. Smartchoice.pk offers multiple financial services where you can also apply for a new credit card.

What’s The Function Of eCIB Report?
The purpose that the eCIB report serves is that whenever any individual applies for a credit card or a personal loan of any kind, the financial institute that has to issue the desire credit card or loan, checks into the eCIB database for the relevant report and checks for a clean history. In the occurrence that the bank finds a clean history, the individual who has put up a request is issued the relevant financial service. However if the case turns out to be the opposite, then the financial institution offering the loan has a right to reject the request.

What Should Be Done To Maintain Clean eCIB Report?
It is extremely important to maintain a clean credit history so that your eCIB report turns out to be positive if you ever need to apply for a new credit card or personal loan. Failure to do so might render you unable to avail such financial services from any financial institute. To ensure that you’ve a clean credit history, you should always file your income tax, pay your loan installments on time as well as paying credit card bills within the grace period. Not only does it save you from monetary loss in the shape of fines, late payment charges etc. It also keeps your credit history healthy and open to future financial opportunities.

Khurram Zahid

The post How eCIB Report Can Affect Your Credit Card Or Loan Approval appeared first on Smartchoice.pk.

Latest word says that SCB is aiming to increase its operating profits twofold in Pakistan within the next 5 years as the nation’s economy grows and so does the demand for loans. According to Mr. Shahzad Dada, CEO of SCB Pakistan Ltd, The bank is targeting an advance to deposit ratio of at least 45 percent in 12 months from 35 percent in the first quarter. The industry as a whole will see the same trend, he said, with ratios rising to as much as 70 percent in three years from 46 percent in 2015.

“The economy has opened up” and there is demand from private-sector borrowers, Dada said in an interview in Karachi, the commercial capital. “Putting money to work is the easy part. It’s finding the right quality, right sponsors, right business ideas.”

Pakistan’s Prime Minister Nawaz Sharif is seeking to boost economic growth to its fastest pace in more than a decade after achieving stability through an International Monetary Fund loan program that averted an external payments crisis in 2013.

Suspicious Money:
South Asia’s second-largest economy may prove to be a bright spot for Standard Chartered, which posted its first annual loss in more than a quarter of a century last year and is seeking to restructure or jettison about $100 billion of assets. The company declared $1.34 billion of impairment losses on loans in neighboring India last year, a legacy of its now-abandoned policy of rapidly expanding in emerging markets.

In Pakistan, finding quality assets and exercising discipline in extending credit will be key to driving the business, Dada said. His unit’s operating profit climbed to 15.4 billion rupees ($147 million) last year, almost triple the amount in 2010, data compiled by Bloomberg show.

For Pakistan, the risks for banking are associated with “suspicious money” being put through lenders for illicit purposes such as terrorism financing, corruption and human trafficking, Dada said. The country placed in the lower half of Transparency International’s 2015 Corruption Perceptions Index with a ranking of 117th out of 168 countries tracked by the organization.

Standard Chartered had boosted its scrutiny of money flows, Dada said. The unit he oversees has more than doubled financial-crime compliance staff to 57 this year from 23 in early 2015, he said.

Lower Rates:
The London-based lender has been enhancing controls on money laundering, bribery and other offences and has been operating under deferred prosecution agreements with U.S. authorities since 2012, when it settled cases related to money-laundering failures and breaches of U.S. sanctions against Iran.

The bank’s Pakistan shares have fallen 15 percent this year, compared with the benchmark index’s 9.5 percent gain. Standard Chartered’s stock in London lost 3 percent in that time.
Pakistan’s private sector is being tempted to borrow after the country cut its discount rate by the most in Asia last year, and by 375 basis points in the past two years, after the drop in oil prices. The nation’s central bank unexpectedly cut its benchmark interest rate to 5.75 percent this month before the government presented its budget for the new financial year last week. Pakistan’s consumer confidence level rose to the highest level in eight years in the March quarter, according to New York-based Nielsen, which tracks the data.

Outstanding private-sector loans in Pakistan climbed about 9 percent to $35.4 billion as of April from a year earlier, central bank data show.

“The rise in loans tell you the economy is picking up steam and banks mean real business after heavily investing in government securities for years,” said Yawar uz Zaman, head of research at Karachi-based Shajar Capital Pakistan Pvt.

Khurram Zahid

The post Standard Chartered Pakistan Targets Growth To Increased Loan Demands appeared first on Smartchoice.pk.