6 Tips to Improve Your Personal Loan Eligibility

6 Tips to Improve Your Personal Loan Eligibility

Personal loans can be really useful tools, whether you’re in a tight financial spot or you simply want to extend your budget for a project. Personal loans are disbursed in a matter of hours if you are pre-approved; but how can you improve your personal loan eligibility? Here are a few tips.

Improve your credit score
A high credit score means that you can be pre-approved for a loan, and it also means that you can get a personal loan disbursed in an extremely short period of time. You can do a number of things to increase your credit score. Pay all your EMIs on time, for one. Pay your credit card dues in full and on time. If you have other bills like postpaid phone bills, make sure you pay those in time as well. Avoid subscribing to too many credit cards or having a large credit limit. Finally, avoid frequent requests for loans (that is, multiple applications for loans) because these will also negatively affect your credit score. You should try and keep at least six months between requests to keep your credit score high. A high credit score will not only enable you to get quick approval for a loan but could also possibly make you eligible for lower personal loan interest rates and/or longer tenures.

Keep an eye on your debt-to-income ratio
Your debt-to-income ratio is the amount of debt you have, in percentage terms, versus the money you earn. Your monthly debt-related payments should not exceed 40 percent of your total income. Any higher than this and your eligibility for a personal loan will dip.

Show sources of income
This is a straight relation—the higher your income, the more capable you will be at repaying a loan. Therefore, if you have more than one source of income, you should show it at the time of application. This is also a good reason to keep your sources of income above board, pay taxes, and file for returns because it allows the lenders to run a check and verify that you have the capability to earn an income consistently for an extended period of time, making you a low-risk borrower for an unsecured loan like a personal loan.

Apply for one loan at a time
Do not apply for multiple loans at the same time. If you need to, apply for different loans at different times. For example, if you have applied for a personal loan, let the approval and disbursement happen, and then you can apply for a car loan or a home loan after. Don’t apply for both at the same time because it will reduce your eligibility for both loans.

Opt for a lender with simple eligibility criteria
Some lenders have very confusing criteria, and if you do not understand the criteria properly, it can lead to a rejection of your application. This will end up frustrating you because it will result in a low credit score as well. It is better to opt for a lender whose eligibility criteria are simple enough for you to understand thoroughly, even if the interest rate might be higher. You can still check if the EMIs are affordable to you, as most lenders have tools like a personal loan EMI calculator on their websites that you can use without applying for the loan.

Show your work experience including source of income
Since a personal loan is an unsecured loan, lenders need reassurance that you aren’t a high risk for such a loan. As such, if you can show your work experience, it will help make the case that you have a reliable source of income that will not dry up anytime soon. If you are a salaried person, any employment of more than one year in the same office is viewed as a positive thing. If you run your own business, you need to show profits for a slightly longer period, say, two years, for lenders to be comfortable enough to approve a personal loan for you.

Comments

No comments yet. Why don’t you start the discussion?

Leave a Reply

Your email address will not be published. Required fields are marked *