Personal loans are obtained by individuals to be used for various reasons, including home renovation, international travel, and debt consolidation. They are typically unsecured, so you are not required to offer collateral, which makes them a desirable financing option for clients. Furthermore, it might be challenging to get personal loans approved.
They are now a well-liked financial option in India because they can be excellent sources of capital during times of need. However, to be eligible when you apply for a personal loan, you must meet the lender’s requirements. Use these five suggestions to increase your loan eligibility if you want to guarantee loan approval with favourable terms and conditions.
- Maintain a high credit score for easy approval: Your credit score measures your ability to repay the loan. Therefore, when you apply for a personal loan, your chances of getting approval improve based on a higher credit score. To get personal loan approvals quickly, an ideal credit score is higher than 750.
Before you apply for a personal loan from any bank or NBFC, waiting and raising your score is preferable. By paying off your current debt, paying all of your bills on time, avoiding credit card debt maxima, and other actions, you can improve your credit score. A personal loan calculator can absolutely help you in calculating the standing expenses, payments, etc.
- Reduce your debt-to-income ratio: Make sure to settle your credit card debt and other outstanding debts before you apply for a personal loan to lower your debt-to-income ratio. Your creditworthiness to obtain new loans is reduced if you repay existing debts with a large portion of your income. It might make it more difficult for you to get a loan approved, or even worse, the lenders might charge you a high-interest rate to compensate for the increased risk.
Always make sure to keep your Fixed Obligation to Income Ratio (FOIR) between 40 and 50 per cent. If it is more than that, settle it before you apply for a personal loan. Paying off your debts and credit card bills can help you improve your chances. Use a personal loan calculator to calculate your interest, EMIs and other aspects of loans.
- Say no to applying for multiple loans at once: Avoid submitting numerous loan applications to various lenders hoping that at least one of them will approve you. It gives the false impression that you need multiple loans to cover your expenses, making you appear desperate for credit. In addition, if you are denied these loans, your credit score will drop, making it extremely difficult to obtain any credit.
- Go for a longer tenure loan: Your EMIs will be divided into smaller payments if you choose a longer loan term, which will ease your financial burden of making timely repayments. It will lower your FOIR and improve your chances of getting the lenders’ approval. A loan for an extended period increases the likelihood that the personal loan will be repaid on time, lowering the risk for the lender.
- Apply for the right loan amount: When you apply for a personal loan, ensure you don’t get over-excited and go for an amount beyond your means. You must apply for the appropriate amount for your loan application to be approved. Use a personal loan calculator to determine how much you are qualified for based on your income, current debts, and other factors before proceeding to apply for a loan.
- Add a co-applicant: There is typically an option to add your partner or parent as a co-applicant. It is beneficial if your credit profile isn’t up to par or satisfactory. Your chances of getting a loan will increase if your co-applicant has a high income and credit score. You can take the help of a personal loan calculator to calculate the liabilities.
- Finally, endeavour to apply for a personal loan online to simplify and hasten the approval procedure.
Selecting the appropriate lender to guarantee a stress-free and seamless experience from the loan application stage through loan approval and funding is critical. Thus, follow these tips to get a personal loan that caters to satisfying your needs.