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How to Increase Your Chances of Getting a Personal Loan?
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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.
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A personal loan can help you finance planned or unplanned expenses that go beyond your financial capabilities. Whether it's a much-needed vacation, an emergency, a home renovation, or a major event like a wedding, a personal loan can spread the expense over time, making it more manageable and affordable. Personal loans have quick disbursals, require no collateral, and you can use the funds for any purpose. So, it’s a popular financing option among borrowers.
Availing the benefits of a personal loan might seem simple. However, you need to meet the necessary eligibility criteria set by the lenders and follow smart tips to ensure your loan application is not rejected. Here are five expert-recommended tips that can help you boost your personal loan eligibility and speed up the loan approval and disbursal process.
A credit score reflects your credit history and how you have previously managed debt. Lenders use this information to assess your repayment capacity. A good credit score shows that you are a responsible borrower and may increase your chances of getting a higher loan amount with low-interest rates and a favourable tenure.
You can strengthen your credit score by following sound financial habits, such as paying off your debts on time, keeping your credit utilisation ratio under 30%, and monitoring your credit report for any inaccuracies.
You must borrow only the amount you can afford to repay with Equated Monthly Instalments (EMIs) that fit your budget comfortably. Use a personal loan EMI calculator to estimate the monthly instalment payable and plan your finances accordingly. It's an online tool that many lenders offer on their websites. However, there are three things that you need to know before you use this tool – the loan amount, interest rate, and the repayment period. The interest rate varies across lenders, with some charging 10.99% p.a.
After feeding in these three details, the calculator will show you the monthly instalments on your loan. Once you have considered the EMIs and additional fees, you can confidently click on the personal loan apply online button.
The Debt-to-Income (DTI) ratio is the percentage of your monthly debt payments divided by your gross monthly income. Using a high percentage of your monthly income on repaying debts can reduce your creditworthiness for a personal loan. So, try to maintain a ratio of 40% to 50%.
For example, if you earn Rs. 30,000 monthly, your EMIs should not be more than Rs. 12,000. If your monthly repayment obligations are already higher, choose an extended tenure to reduce your personal loan EMI burden.
Show the lender that you are capable of repaying a personal loan by mentioning additional income details such as rents, dividends, etc. The more income sources you provide, the better chance you have of getting a loan sanctioned.
Always compare the loan offers of different lenders based on their interest rates, loan tenure, processing fees, late payment charges, etc. After that, select a lender that offers a competitive personal loan interest rate based on your credit score and requirements.
Getting instant approval on a personal loan not only depends on the lender but also on the borrower. Every lender may have different requirements for approving a personal loan application. But as a responsible borrower, you can follow these tips to improve your eligibility and ensure a hassle-free process.
Additional Reads: Top 5 factors influencing your personal loan interest rate
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