The popularity of Personal Loans is on the rise as they provide the user with a number of benefits. Since personal loans can be used for any purpose without any restriction, they emerge as the perfect solution to resolve emergency financial crunches. Along with that, the competitive interest rate and flexible repayment options make this a preferred financial product among borrowers.
Furthermore, the online application process has also made it easier to get a Personal Loan. You can complete the process from the comfort of your home, office or anywhere else.
However, you need to meet the eligibility for a Personal Loan to qualify, and you can improve on this point to get a better deal.
The question here is how to better these pointers. Well, read on for some suggestions.
8 Tips to Better Your Eligibility for a Personal Loan
Here are some essential tips that can help you qualify for a personal loan without any hassle –
Maintaining a High Credit Score
The credit score is a testament to your creditworthiness. It shows how much loan you have paid back on time, your general expenditure behaviour, etc. Since a Personal Loan is an unsecured loan, the level of risk for the lender is also high. As a result, lenders prioritise borrowers with a high credit score, preferably above 700.
Therefore, before applying for your Personal Loan, check the requirement of your chosen lender in terms of credit score. If you match it, then you can move ahead with your application. Or else you need to take steps to improve your score.
A point to remember here is that it is better to increase your credit score first and then apply for a loan, or there is a chance that your application may face rejection.
Pay Back Your Existing Debts
Another aspect to keep in check before applying for a Personal Loan is clearing all your debts and card bills. If you already have some EMIs to pay every month, then it is better to pay those off first. This reduces your Debt-to-Income (DTI) ratio. If this ratio is high, the lenders believe you do not have sufficient money, and you may default on EMIs. Since servicing too many debts and loans at a time is difficult, clearing all your debts and dues and increasing your disposable income before making a new Personal Loan application is advisable.
Avoid Making Multiple Loan Applications
If you want to get a Personal Loan as early as possible, you should avoid making multiple loan applications at one time. This would lead the lender to think that you are credit hungry, and the risk of borrowing will also increase. The lender may turn down your loan application altogether. So it is better to think first and then come to a conclusion. Calculate the amount you need, go through the terms of different financiers and see which one will best cater to your needs and apply for only that.
Increase Your Total Income
Income is another important parameter for a lender. It shows how much you can repay your loans on time. If the lender thinks that you will not be able to repay on time, chances are that your application will be rejected. So it is better to include all your sources of income. Every source, like house rent, farming etc., will add to your repaying ability. Therefore, your chances of getting an approval will increase.
Meet All the Prerequisites
Every lender has some prerequisites that are mandatory to be met by the borrower. You have to check all the criteria and see if you match them. If not, you should first try to catch up with that. Alongside that, gather all the necessary documents required for a Personal Loan. There is a certain age criterion that needs to be met as well.
Therefore, as a prospective borrower, you need to review all the parameters of an online Personal Loan and then plan your application.
Select a Long Repayment Tenure
Usually, the repayment tenure of a personal loan varies between 12 months to 72 months. A longer repayment tenure means the monthly installment amount will be less. This will further reduce the probability of you defaulting on the loan, and subsequently, the lender’s risk factor decreases. So the lender will be more likely to approve your loan application.
Apply for the Right Loan Amount
It is essential to apply for the correct amount of loan. Consider all your expenditures for a month, and with the help of a loan calculator, calculate the amount you should borrow. This amount should correspond with the income in the documents. Only then the lender may approve your loan application quickly.
Apply With a Co-applicant
If you cannot meet a few requirements of the lender, consider getting a co-applicant. If you apply with another person, the lender’s subsequent risk factor will also decrease. The co-applicant will have equal responsibilities in paying back the loan on time. Making a joint application can also get you a high loan amount, as it will increase the applicant’s monthly income and credit score. Besides, you can negotiate a better interest rate on your Personal Loan.
These are some factors you should keep in mind while taking a personal loan. Moreover, you can now apply for a Personal Loan online, as it takes little time to complete the process. You can apply using your smartphone in a few minutes, and the lender can check your application quickly.
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