If you’re looking for some funds to satisfy your emergency monetary requirements, you should consider getting a personal loan. All traditional banking institutions ranging from State Bank of India to Yes Bank offer personal loans these days. As a matter of fact, there are quite a few Non-Banking Financial Corporations (NBFCs) that are also offering this credit facility.
Now, while the application process for a personal loan may be easy and simple to complete, there’s the question of eligibility. Financial institutions only offer the facility if you satisfy the eligibility criteria set by them.
If you’ve been rejected for a personal loan in the past or are simply unsure of whether you would qualify for one or not, this article can help. Here are some tips that you can follow to improve your eligibility for a personal loan.
5 Tips to Improve Your Personal Loan Eligibility
#1 Improve Your Credit Score
The best way to ensure that your personal loan application is approved is to ensure that you possess a high credit score. All financial institutions check your credit score first before granting you a personal loan. So the higher the credit score, the better your chances of your loan getting approved.
Ideally, your score should be at least 700 or above to qualify for a loan. Therefore, if you find that your score is less than ideal, you might want to take some measures to improve it first before applying for the loan. You can find a wealth of information on how to improve your credit score online.
#2 Pay Off Some of Your Debts
Another major factor that’s taken into consideration before ascertaining whether you’re eligible for a personal loan is your debt level. The more your monthly debt obligations are, the lower your chances of getting your personal loan application approved. Financial institutions typically value individuals who have fewer debts to service. This is simply because people with fewer debts are more likely to make repayments on time.
So, if you’re servicing multiple debt obligations at the same time, you might want to clear off a few of them before applying for a personal loan. This will ensure that your debt-to-income ratio is healthy, which can have a major positive effect on your eligibility.
That said, if you’re not able to clear off all your debts, at least consider paying off the ones with the highest interest. On the other hand, if you’re unable to clear debts in full, you can also make partial payments to reduce the impact of your debt.
#3 Compare Multiple Lenders
Not all financial institutions have the same eligibility criteria. Some of them may be quite stringent with their criteria, while others may be more relaxed. Considering the fact that there’s so much variation in the eligibility requirements of lenders, it might be a good idea to compare different institutions with one another.
This simple comparison exercise should give you an idea of the lenders who have minimal eligibility requirements. Once you’ve found out who they are, consider making an application. That said, here’s something that you should be aware of. A few lenders with relaxed eligibility criteria tend to charge higher rates of interest on their personal loans. It is advisable to look for the right balance between relaxed eligibility and affordable interest rates like in Yes Bank personal loan.
#4 Don’t Apply For Multiple Credit Facilities
Many people tend to apply for multiple credit facilities or with different lenders around the same time thinking that it would increase the chances of getting a loan sanctioned. However, the truth is very far from that.
In reality, applying for various loans or with multiple lenders only increases the chances of rejection. This is because lenders generally tend to do hard credit inquiries into borrowers. Too many hard inquiries in quick succession can end up negatively affecting your credit score, due to which you might become ineligible for a personal loan.
Therefore, if you’ve been rejected by a financial institution for a credit facility recently, consider giving yourself some time off. Meanwhile, you can look to improve your credit score and reduce your debt. Once you’ve taken remedial measures, you can try applying for the credit facility once again after a few months.
#5 Prove Your Income Levels
Your income level is another major factor that a financial institution takes into consideration for determining your personal loan eligibility. The higher your income, the greater the chances of getting a personal loan.
Since lenders need to be assured that you have the capability to repay your debt obligations on time, it might be a good idea to disclose all your sources of income to them when applying for the credit facility and not just your salary. For instance, if you possess any mutual fund investments or fixed deposits, consider disclosing them to the lender. This simple action can help you land a loan.
Following these 5 tips outlined above can help improve your personal loan eligibility by quite a bit and may even lead to your application for the facility being approved. If you’re looking for a loan with a highly attractive interest rate, consider applying for a Yes Bank personal loan. Applying for one is very easy and can even be completed online from the comfort of your own home within a few minutes.