A ‘loan’ is no longer a bad word in today’s age. People have been borrowing money from banks and new-age fin-tech companies for all purposes. Digitized processes and instant loan approval apps have made it much easier to avail personal loans as well. A personal loan is an unsecured loan which is usually taken when there is an emergency or an unexpected expense. It is a great way to make ends meet without being answerable to the lender as to how you spent the money. However, many people aren’t able to get approvals for their loans. Here are some simple tips to ensure your personal loan is approved without fail:
- Credit score
A good credit score is usually very important to get a personal loan. A decent credit score improves your chances of loan approval and also helps you get a competitive rate of interest on loan repayment. So, keep a check on your credit score and make sure it is updated before applying for a personal loan.
- Documents
It is essential to give all the required documents to get a personal loan. Loan providers thoroughly verify all the documents before approving the loan; so make sure that all information regarding your annual income, tax returns, residence proof, etc. is correct. Lenders are more likely to reject your loan application if you have applied for a similar loan in the past six months. There should be a gap of at least six months between loan application to avoid rejections. In case you need a personal loan for a non-urgent reason like a vacation or buying a car, you should wait for a few months before applying.
- Check loan eligibility criteria
Different financial institutions have different eligibility criteria for applying for a personal loan. Most lenders require that the applicant must be above 21 years of age and a maximum of 65 years. A minimum annual or monthly income is also required. Another important criterion is that there should be no outstanding or default on loans or credit cards.
- Avoid multiple applications
It is recommended not to apply at numerous places for a personal loan, as the probability of getting the loan gets lower. Rejection of multiple loan applications could also negatively affect your credit score.
- Apply for a realistic amount
Sometimes borrowers apply for a huge loan amount which could be rejected by the lender. It is important to apply for a loan of a realistic amount. Lenders usually check your income as well as repayment ability before loan approval. Lenders will evaluate your ability to pay off your loans, so make sure that your existing EMIs are less than 30% of your total income. This does not include a home loan EMI. Thus, applying for a reasonable amount increases your chances of approval.
Loan providers consider many factors while approving personal loan applications. The applicant’s income, ability to pay, as well as past financial records, all play an important role in personal loan application approvals. To avoid rejections, it is vital to keep the points mentioned above in mind, follow due process, and provide the correct documentation.