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Most of the people in India prefer a personal loan for dealing with cash shortages or financial emergencies. This is because these loans are easily available, require no collateral and are approved very fast. Due to the rise of digital lending, you can apply for these loans online, and there is no need to visit a branch.
But to get this loan, you have to fulfil the eligibility criteria. This depends on credit score, repayment history, income stability, existing debt obligations, etc. In this blog, we will study in detail various hacks to improve the personal loan eligibility criteria, which will help you get a loan faster.
What Lenders Look for While Evaluating a Personal Loan?
Lenders go through certain parameters before approving your personal loan. They are: –
- Credit Score
- Monthly Income
- Existing EMIs and Debts
- Stability in Employment
- Consistent Income
- Age
- Credit history
- Banking Behavior
If you have proper knowledge about these factors, then you can improve your personal loan eligibility strategically without making random changes.
Tips to Enhance Personal Loan Eligibility
Here are some tips which can help you enhance personal loan eligibility criteria, which will boost your chances of loan approval: –
- Maintain a Good Credit Score
Your credit score plays a very important role in loan eligibility. This is the first thing the lenders check while evaluating the loan application. Your credit score represents your past credit behaviour. A credit score of 750 or above is considered good enough. With this score, your loan approval chances increase, and you can also get the benefit of low interest rates.
- Make Timely Repayment of EMIs & Credit Card Bills
Your repayment history matters a lot. It is an important personal loan eligibility parameter taken into consideration by lenders while evaluating a loan application. Even if you miss a single payment, it can affect your score and create a negative impression.
Hence, you shall always pay EMI and credit card bills before the due date. To ensure this, you can have mobile reminders for the due date. You can also set autopay so that the EMI get deducted directly from your bank account, and there are fewer chances of missing out.
- Keep a Lower Debt-to-Income Ratio
Lenders check your repayment capacity by going through all the total obligations you have. This is done through the debt-to-income (DTI) ratio. It determines how much of your earnings goes into paying EMIs. Lender expects that this ratio is below 40%. Hence, if you have too many ongoing loans, then you shall pay them off and try to bring down the DTI ratio to improve eligibility.
- Don’t Apply for Too Many Loans
Don’t make the mistake of applying for too many loans in a short span of time. Because each time you apply for a loan, the lender runs a credit inquiry on your name. This is called a hard inquiry, and it affects your credit score. It also gives an impression to lenders that you are hungry for credit, which is not good. Instead of this, you can research a bit about various lenders and then apply to a lender which suits your requirements.
- Have a Stable Job/ Consistent Income Source
Your employment and income matter very much in loan eligibility. A lender will always prefer an individual with a stable job. If you have frequent job switches, then it indicates an inconsistent income pattern. Lenders expect that an individual has been working with an organisation for 6-12 months.
On the other hand, if you are self-employed, then you have to prove a consistent income source. For this, you can provide ITR or bank statements.
- Go for a Lender with Easy Eligibility
There are so many banks, NBFCs and fintech lenders offering personal loans. Each of them has different terms and conditions. Hence, you shall do proper research on various lenders before applying for a loan. Choose the lender which suits your profile, and you meet maximum eligibility requirements.
- Add an Additional Source of Income
If your income is not sufficient to qualify for a personal loan, then you can show additional earnings you have been getting from various sources. This includes freelancing income, rental income, side business earnings, and investment income. This additional income increases your repayment capacity and can improve personal loan eligibility.
- Apply with a Co-applicant
If your income or credit score doesn’t match the eligibility criteria, then it’s advisable to add a co-applicant who has a stable income and a good credit profile. This can improve your loan approval chances. This is because the lender, in this case, will consider combined income to calculate repayment ability, which can improve the eligibility.
Conclusion
To get a personal loan, you will have to fulfil the lender’s eligibility criteria. Lenders take into consideration various parameters while sanctioning a loan, such as credit score, income, repayment capacity, existing debt, etc. Improving your eligibility is not such a tough task. In this blog, we have mentioned several tips which can help you improve your eligibility for personal loans. It can also help you get a loan at lower interest rates and get various loan offers.
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