Many studies highlight that there is an increase in the number of individuals seeking personal loans. The number is predicted to rise further. Borrowers highly depend on personal loans to meet their cash requirements. Why is this so? This is certainly because opting for a personal is easy. Also, personal loans are unsecured in nature and come with convenient terms of service. Thus, personal loans are a much favoured option in times of financial shortfalls.
As availing a personal loan does not require pledging of a collateral and since lenders have nothing to grab on in case a borrower defaults, they are even more strict about the personal loan eligibility criteria. To help you improve your chances of a personal loan approval, here are a few ways you can adopt for the same.
Acquire an high credit score
A credit score is a three digit number that highlights your creditworthiness and a score of 700 or more is deemed ideal. An excellent score speaks of your ability to repay debt on time and is indicative of a spotless repayment track record. Both these are crucial in the context of personal loan eligibility as this loan is an unsecured form of credit. You can build your score by paying current EMIs and credit card bills diligently and limiting your credit utilisation ratio.
Have a controlled debt-to-income ratio
Alongside your credit score, lenders check your debt-to-income ratio as this indicates how easily you will be able to pay personal loan EMIs. Your DTI ratio is as important as your credit score and to enjoy quick loan processing, lenders often set 30-50% as a limit. To better this ratio, you can apply for a personal loan after clearing a portion of your existing debt or indicate additional sources of income when you apply.
Take help of a personal loan eligibility calculator
To check your personal loan eligibility, simply use your lender’s personal loan eligibility calculator when planning to borrow to meet your goals. By entering your monthly income and expenses, you’ll know just how much you can borrow. Applying for the right loan amount can get you faster approval on your application.
Qualify for the lender’s eligibility criteria
Once you pick a lender who offers sufficient funding, ensure that you check the personal loan eligibility criteria listed. These criteria centre around your age, employment, and income and meeting them is crucial to obtain a personal loan in India. To prove your personal loan eligibility, keep the required documentation at hand.
Employment status and history
Lenders also consider your current employment and job stability to approve your personal loan. If you have changed jobs too frequently in the past or are not employed with a private or public company or MNC, then your application may not make the cut. By ensuring that you have a steady income and can prove this with salary slips, you can increase your chances of approval for a personal loan. Meeting the minimum income criteria based on your city of residence as per your lender’s eligibility criteria is also a must.
Choose the right loan tenure
Lenders allow you to space out repayment over a period as long as 60 months. The personal loan calculator helps you compute your EMIs and choose an appropriate tenor. When doing so, remember that long tenors are preferable as they allow easier repayment, owing to smaller EMIs. However, a shorter tenor means your total interest outgo is lower. So, by picking the right tenor, you can plan better repayment, which is also something that the lender will investigate when approving your application.
Finally, stay away from making multiple loan applications at once as this causes your credit score to dip.
