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Tips to increase your personal loan eligibility when you are applying for the first time
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A personal loan is a vital option to go for in times when you witness financial exigencies. With quick disbursal, zero security and no restriction on the end usage of the offered proceeds, a personal loan is highly beneficial for mitigating your instant monetary crunch. However, to be eligible for a loan, you must meet specific personal loan eligibility criteria set by the lender.
Read on to know three ways you can enhance your personal loan eligibility.
Usually, if you have a credit score of 750 and above, you can get a loan at a lower personal loan interest rate than those having a lower credit score. As the need for a personal loan is usually immediate and can come up anytime, checking your credit score right before applying for a loan might not be very helpful. It takes time to build a credit score and a periodic review of your report is the only way for you to review your credit discrepancies and behaviour. Doing this endows you with sufficient time to take accurate steps to improve your credit score, which results in increased loan eligibility prospect. A few of the measures to form your credit score involve maintaining a good balance between your secured and unsecured credit options, timely repaying your loan EMIs and credit card dues in full, keeping a CUR (credit utilisation ratio) of under 30 per cent, timely monitoring co-signed/guaranteed loans, etc.
Ideally, you must fetch a free credit report yearly from each of the four credit bureaus. This permits you to disseminate your request for credit reports in a manner where you can fetch one free credit report every quarter. You can also approach online lending marketplaces to get free credit reports along with monthly updates.
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When you apply for any loan, lenders tend to raise an inquiry with the concerned credit bureau to assess your default risk. Such inquiries are known as hard inquiries, which reduce your credit score by a few points. Multiple such credit inquiries in a short time period can be disastrous for your credit and financial health, as it not just lowers your score by a wide margin but even reduces your chances of availing an approval on your personal loan application.
So, before you hit on the personal loan apply button, ensure to review the lender completely to understand if it is as per your suitability. Apply for a personal loan with only 2-3 shortlisted lenders and not more. Doing so will allow you to maintain a good credit score as well as boost your chances of getting approval on your own terms and conditions.
Higher fixed obligation to income ratio (FOIR), inadequate income, low credit score or failure to mitigate other crucial eligibility criteria fixed by the lender may either result in outright application rejection or loan application approval at a higher personal loan interest rate. However, if you add a co-applicant with a stable income, good credit profile, satisfactory repayment capacity, high credit score, etc., then this would reduce the lender’s credit risk, which may enhance your chances to avail a personal loan approval. Adding a co-applicant even helps you to become eligible for higher loan proceeds.
Ending note
Financial exigencies come unannounced, may it be an accident, medical ailment, or any unexpected repairs. If you are not prepared, the exigency can financially drain you, or in the worst-case scenario may result in an irreparable harm to your financial stability. Here’s where personal loans come in handy. In fact, you can avail a personal loan even if you are not witnessing any financial exigency. With quick approval and sanction, a personal loan is one of the most common and popular funding means available in the market today.
However, to be eligible for a personal loan, you must meet the eligibility criteria set by the selected lender, in absence of which personal loan approval might be denied or delayed. To enhance your chances of availing a personal loan approval, use an online personal loan EMI calculator to effectively check the personal loan EMI, personal loan interest rates, and repayment tenure that you can serve as per your repayment capacity.
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