Money is an indispensable requirement in our daily lives. However, there might be situations where you find yourself at a disadvantage due to a lack of adequate funds. Unforeseen financial requirements could emerge, such as medical emergencies, accidents, funds for higher education, random house or vehicle repairs, etc. Facing such situations without having contingency funds at your disposal could prove to be a significant monetary setback below-mentioned tips will help improve your chances of personal loan eligibility.
Thankfully, this is the ideal scenario to apply for a personal loan. Personal loans provide you access to sufficient funds and usually get approved quickly. In the past few years, this has become a preferred option for several people in the country who need access to monetary resources. However, ensuring that the loan gets sanctioned would require you to meet the lending agency’s eligibility criteria. The below-mentioned tips will help improve your chances of personal loan eligibility.
Improve your chances of personal loan eligibility
1) Debt-to-Income Ratio – Decrease It
No lender would willingly lend money to someone who is already burdened with financial debt. Therefore, it is essential to clear out all your outstanding credit card bills and debts. If you have existing loans and EMI payments, it is best to pay them off quickly before applying for a personal loan. Always ensure that your total EMI payments do not exceed more than 30-40% of your total monthly income. Using a personal loan interest calculator can help check where you stand concerning your debt payments. Ideally, a 15% debt-to-income ratio is considered acceptable.
2) Maintain an ideal credit score
Lending agencies in India rely on CIBIL reports to determine whether they will grant a personal loan to prospective borrowers. A CIBIL score of 750 and above usually improves your chances of instant loan approval. Regular payment of bills and debt over the previous year assures a good score, failing which your credit score could suffer. Personal loans are risky for the lending party as this is an unsecured loan with no assets or security. In such scenarios, a strong credit score greatly improves your chances of personal loan eligibility.
3) Ensure all sources of income are identified
Lenders want assurance that the borrower has the adequate means to repay the loan in full. It is vital to use a personal loan interest calculator to chart out the exact repayment details. The best way to put the lender’s fears to rest regarding your repayment capability is by sharing details regarding all your sources of income such as:
- Your salary
- Income from other sources, ex. Part-time work income, rental income, etc.
- Variable pay such as salary bonus, work-related incentives, etc.
- A joint loan with your spouse can also be done (if they are working/have a regular source of income)
4) Refrain from applying for multiple loans simultaneously
Every time you apply for a personal loan, the lending institution will first inquire with CIBIL regarding your past credit history. And the higher the number of inquiries into your credit history, the lower your credit score becomes. Hence, the best approach would be to conduct thorough research and choose the lender you wish to approach instead of trying your luck with multiple lenders all at once.
- Check whether you fulfill the lender’s Loan Eligibility Criteria
Most lending agencies have standard eligibility requirements related to monthly income, age, total work experience, expected loan amount, etc. The most common requirements are:
- You must be a citizen of India within the age range of 23 to 58 years.
- Minimum experience of 12 months in your current field of work and be employed with your current company for at least six months.
- You must draw a monthly salary and meet the minimum salary requirements defined by the lending institution.
Once the above criteria are met, the lender requires online verification of critical documents (Aadhar & Pan Card, Loan Application Form, Salary Slips, etc.) to complete and award the loan amount officially.
Other factors to bear in mind when applying for a personal loan
- A high loan amount application might adversely affect your request and could also be a hassle to repay. It is advisable to check the total amount you will have to pay using a personal loan interest calculator.
- Choosing a long-term loan (of 3-5 years) usually helps to improve your chances of being granted one. It also helps while paying EMI as the amount for the same gets evenly distributed over a longer payback period.
- Most importantly, when filling out the loan application form, verify all details are correct. Any missing data or discrepancy could raise suspicion in the eyes of the lender and ruin your chances of being granted a personal loan.
Following these tips will surely help improve your loan eligibility.