How Can I Enhance My Personal Loan Eligibility Ways To Improve It

Want to Enhance your Personal Loan Eligibility? Follow these tips

Wondering how to enhance your personal loan eligibility? There are simple ways in which you could achieve that. In this article, we will discuss how you can increase your chances to be eligible for a personal loan.

Ways to Enhance your Personal Loan Eligibility

A personal loan is one of the quickest and hassle-free ways to get finance when you need it the most. It is unsecured, needs minimum documentation, offers flexibility for repayment, and can be used for various purposes. 

Below are some of the ways to ensure you could easily get a personal loan.

1. Improve your credit score – Improving your credit score is one of the best ways to ensure you have good credibility. Banks and financial institutions often look at your credit score before offering a pre-approved personal loan. It is also useful when you are applying for a personal loan. It makes the process faster and might get you a low rate of interest too. A credit score of 750+ is considered a good score for loan approvals.

 

2. Limit your finance inquiries – Avoid making too many inquiries for credit cards/loans, etc. in a short period of time. Too many inquiries look like there are a lot of financial responsibilities you need to be fulfilled. Or, maybe you aren’t very good at financial discipline. Too many inquiries can actually bring your credit score down.

 

3. Add a co-applicant – Adding a co-applicant reduces the lenders’ risk and hence they would be more willing to approve a personal loan. Applicants having lower chances of loan approval due to poor credit scores, low-income levels, job profiles, or any other reason, should consider having a co-applicant.

 

4. Maintain a low debt-to-income ratio – Debt to income ratio is calculated as

 

Gross Monthly debt       * 100

Gross Monthly Income

 

The ratio basically tells how much of your income is used in paying for your debts. Maintaining a low ratio means a higher repayment capacity for future loans. Let’s understand this using an example.

 

Car loan EMI = Rs. 25,000

Home loan EMI = Rs. 50,000

Gross monthly income = Rs. 2,00,000

 

Your total dent here is Rs. 25,000 + Rs. 50,000 = Rs. 75,000

 

Your debt-to-income ratio would be 

(75,000/2,00,000) *100 =37.5%

 

This is not a bad debt-to-income ratio but applicants should try and maintain the ratio between 20% to 35%.

 

5. Choose a longer repayment tenure – You can choose to repay your personal loan within 12-60 months. Opting for a longer repayment tenure reduces your EMIs and hence reduces the monthly outflow of money. If you are slightly low on finance, you must take a longer tenure to better manage your finances.

 

6. Show additional income sources – Lenders would be more willing to approve a personal loan if they see additional income sources separate from your basic income. These could be additional bonuses, side businesses, investment income, etc. More income means your repayment capacity is better and hence better chances of loan approval.

 

Top Banks and their Personal Loan 

We have put together a list of prominent banks in India with their personal loan offering. You can choose from your preferred offering.

 

Eligibility Criteria for Personal Loan by Top Banks

 

FAQ of Want to Enhance your Personal Loan Eligibility Follow these 4 tips

1. What is a personal loan?

A personal loan is an unsecured loan offered by banks to their existing customers.

2. What are the documents needed for a personal loan?

Since the loan is offered by a bank to their existing customers, usually no additional documentation is needed. However, if the bank feels the need, they may ask for additional documents.

3. What can I use a personal loan for?

The best part of a personal loan is you can use it for a number of reasons. No questions asked. Be it wedding expenses, vacation expenses, medical expenses, house renovation, or purchase of gadgets, a personal loan can be used for all.

4. What is a good credit score to get a personal loan?

A credit score of 750 and above is generally considered good for the approval of a personal loan. Maintaining a good credit score greatly improves your chances of loan approval.

5. What are the disqualifiers for a personal loan?

A low credit score, bad credit history, low income, high debt-to-income ratio, high credit utilization ratio, and poor employment, are some of the factors because of which you can be disqualified for a personal loan.

6. What are the fees and charges associated with a personal loan?

The fees and charges differ from bank to bank but usually, there is an interest charge, processing fee, bounce charges, and penal interest.