A personal loan is our preferred option for sudden or unplanned expenses. It is an unsecured loan that requires no collateral, so it is easier to get a personal loan almost instantly. Nowadays, many banks and NBFC’s offer personal loans ranging from Rs.5000 to Rs.75 Lakhs with an interest of 11%-37% per annum.
A personal loan is approved based on the sole criteria of the individual’s credit history and repayment capacity. So, here are some tips that will aid in boosting your chances of getting the personal loan approved.
Tip#1: Check your credit score
The first thing a lender checks for when you apply for a personal loan is your credit score. The credit score establishes your creditworthiness to the lender. The credit score ranges from 300-900, and a score of 750 and above will get you a personal loan.
So, it best to check your credit score before applying for a personal loan. It not only helps in avoiding the rejection of your loan, but it also gives you the confidence to approach a lender. In case your score is low, it also helps you take corrective measures to improve it before submitting your loan application. Sometimes, you can also pre-qualify for loans if you have a high credit score.
Tip#2: Check your Eligibility
Next is the eligibility criteria of the personal loan. As a rule of hand, it is prudent to check the eligibility criteria specified by the lender before submitting the application. This reduces the risk of getting your application rejected. The minimum age requirement for applying a loan is 21 years, and the maximum age is 60 years. The factors of type of employment, minimum annual income, credit score, and so on are some of the other criteria. You can check the eligibility conditions of different lenders by looking at their official website.
Tip#3: Furnish relevant documents
Most often, the personal loan gets rejected due to the absence of relevant documents. Even if the submitted papers do not tally with the information furnished in the loan application, it could be rejected. Ensure that you provide the correct documents and verify the details written in the personal loan application before submitting them to the lender.
Tip#4: Finish off previous outstanding debt
Most financial experts advise that it is vital to have at least six months of gap between successive loans. If lenders know that you already have another loan going on, they might feel less assured about your repayment capacity. Apply for a personal loan considering the urgency of your situation.
Tip#5: Don’t apply with too many lenders
One of the factors that can cause rejection of your personal loan is when you apply at too many places at once. It is a common misconception that applying with too many lenders will guarantee at least one successful application. However, this is not the case; this will give out the impression that you are “credit hungry” and ultimately lead to the rejection of the loan. Ensure that you apply with the lender with whom you have the best chance of approval.
Tip#6: Be reasonable with your loan amount
Financial institutions check the applicant’s repayment capacity before sanctioning any kind of loan. They refer to your current income to arrive at your repayment capacity. So, if you ask for high amounts, there are chances that your loan application will get rejected.
Before arriving at the amount, you also need to keep in mind your current debt obligations as personal loan repayment happens through EMI’s. Check whether you can repay the amount in the specified tenure without disrupting your day-to-day activities.
Tip#7: Choose the right lender
Before choosing a potential lender, you must do thorough research of the lender. Check for the lenders who have good reviews in the market along with the kinds of personal loans offered by them.
The bottom line
You need to prove your repayment ability and have a good credit score for easier approval of the loan. Another added advantage of your good credit score is that you can negotiate with the lender for lower rates and higher tenure or loan amount. Follow these tips above and get the chances of your loan approval increased.