Taking a personal loan is a great way to address your urgent cash requirements. Even being an unsecured form of finance, a borrower can get these loans easily. However, a minor mistake in handling your personal loan application can lead to rejection. To avoid that, make sure you have enough information which is required to secure a personal loan easily. If you are also looking to apply for a personal loan, then you will need these helpful tips to improve your chances to get a loan.
So, look at the 5 tips which can improve your eligibility to get a personal loan.
1. Build your credit score
For a lender, your credit score is an important aspect to decide an eligibility criterion, as it shows a clear picture of your past credit behaviour. A credit score of 750 or above shows that a borrower is responsible for his credit. A strong credit score minimizes the lender’s risk and, therefore, enhances your chances of personal loan approval. Whereas a credit score lower than 750 projects that you haven’t paid your credit bills on time. In this situation, you pose as a high-risk applicant for the lender. Thus, this may compel you to get a personal loan at a higher rate of interest or straight away rejection of your application.
For example, if you want to apply for RBL Bank personal loan and your CIBIL score is excellent, then you can avail a personal loan from RBL Bank at an interest rate of 12%. However, if your CIBIL score does not qualify, then you will have to look for other lenders who might offer a higher interest rate on the personal loan.
2. Pay your existing loans and credit card bills
Before applying for a personal loan, ensure your existing outstanding debts are in control, as high outstanding debt increases your debt-to-income ratio. If you already own multiple loans and credit cards to your name, then taking a personal loan won’t be easy as this sends lender a message, that applicant doesn't have disposable income left to repay the loan. A debt-to-income ratio below 50% is considered ideal to secure a personal loan.
3. Include all your sources of income
Lenders also consider your income as an important factor to decide your eligibility to provide you with a personal loan since it helps them assess your ability to repay. For this purpose, it’s important that you show all your income source including and other than your salary. By looking at your income lender can decide whether or not you can repay the loan. If the lender finds that your income is adequate to settle the loan, then you can get a personal loan easily.
4. Avoid applying for multiple loans simultaneously
When a borrower applies for a personal loan, the lender asks for a credit report from the credit bureau to assess your credit history. These enquires are hard enquiries that get listed in your credit report. In simple words, when you apply for a personal loan with multiple lenders, the credit report shows, the applicant has already applied for a loan with multiple lenders. Thus, it makes you a high-risk applicant and your personal loan application gets rejected. So, it’s better to test your options before applying for a personal loan that fits your needs.
Assume you apply for an RBL Bank personal loan, the Bank will ask for a credit report from a credit bureau. Being a hard enquiry, this will be recorded in your credit report and if you will apply for a personal loan with some other lender, this enquiry will show there. After seeing your credit report, the other lender may or may not reject your personal loan application. Not only your application will be rejected, but you will have to pay a sum for the credit report to the lender. In case of RBL Bank personal loan, the bank charges Rs 50 for a single credit report enquiry.
5. Apply at a lender with simple eligibility criteria
To apply for a personal loan, you must choose a lender who has minimum eligibility criteria to meet. The best thing about the simple eligibility criteria is that it takes lesser time and meanwhile your chances increase to avail a personal loan. For instance, look at the simple eligibility criteria to get an RBL Bank personal loan.
The minimum age of the applicant should be 25 years.
The minimum salary of the applicant should be Rs 25000.
The applicant should be in employment for a period of a minimum of 3 years.
So, if you are looking to apply for a personal loan and hesitating that your application may get disapproved, then follow the above-noted tips to get a personal loan easily. You can start building your credit score if you have a low credit score. To improve your credit score, pay existing debt and bring down the debt-to-income ratio, as it sends a positive message to the lender. Finally, make sure you apply with a lender who has minimum eligibility criteria to meet in order to smoothen your personal loan application.