6 Ways to Improve your Chances of Personal Loan Approval
Availing a personal loan does not require collateral and since lenders have nothing to fall back on in case of a default, they are even more stringent about eligibility parameters. Obtaining a personal loan requires you to make an application that gets the green light every step of the way. To help you do this, here are 6 ways how you can improve your chances of approval on a personal loan in 2020.
1. Possess an excellent credit score: A credit score is a numerical measure of your creditworthiness and a score of 750 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.
A high score gives you access to Personal Loan. This offering gives you funding of up to Rs. 25 lakh from banks/NBFCs. Further, a healthy score can help you secure an attractive personal loan interest rate.
2. Keep your debt-to-income ratio within limits: 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 40% 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.
3. Use a personal loan eligibility calculator when planning: To check eligibility for a personal loan, 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.
4. Meet your 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 eligibility, keep the required documentation at hand.
5. Pay attention to your 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.
6. Pick the tenor wisely: Lenders allow you to space out repayment over a maximum of 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. To avoid this, you can simply check your pre-approved loan offer for a customised deal!