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5 Important Tips on How to Improve Personal Loan Eligibility
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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.
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Personal loans are unsecured loans that can be repaid in EMI options. An individual opts for a personal loan for several purposes like a wedding, a medical emergency, or to buy some assets.
Personal loans offered by banks or any other companies will have different interest rates and eligibility requirements. These loans are offered based on factors such as repayment ability, income source, profession, credit/CIBIL score, and employment history. A personal loan can fulfil urgent requirements. Most banks offer personal loans through an online process.
Tips to Improve Personal Loan Eligibility
A personal loan comes in handy during emergencies or for urgent monetary requirements. If a personal loan does not satisfy eligibility criteria, personal loans can be delayed or even can be ignored. Check personal loan eligibility before approaching the bank. You can use a personal loan eligibility calculator to do that. Here are some points to take into consideration to increase your chances of qualifying the personal loan eligibility criteria.
Your credit score is one of the most significant qualifying criteria for lenders to approve your personal loan. A credit score gives an overview of your past credit activities. If an individual is maintaining a credit score of 750 or above states that he/she is a responsible borrower. When the borrower repays the loans in time, then the credit score will be good.
If an individual has a good credit score, the chances of personal loan approval are high. A credit score of less than 750 indicates that the person has a poor payback history; this may indicate to the bank that the applicant is a high-risk applicant, and interest rates can be on the higher side. It can even lead to the rejection of the application.
Make sure you pay off your existing debts before asking for a personal loan, as this will boost your debt-to-income ratio. It will be difficult to service another loan if you currently have multiple loans and credit cards. This encourages the lender to assume you don’t have enough money and are likely to miss or skip payments.
People assume that making multiple applications to different lenders increases the probability of the loan getting approved, but sadly that is not going to happen. Instead, that may decrease your credit score, which eventually leads your application to get rejected.
Before applying for a personal loan, it is necessary to research different lenders available. One should compare various lenders instead of taking personal loans from a random one. Some lenders offer lower interest rates, but the hidden charges are high; these are designed to keep you in permanent debt.
Ideally, you should not devote more than 40% of your salary to EMI payments. So, if you earn Rs 50,000 each month, your EMI payments should not exceed Rs 20,000. Your debt-to-income ratio is calculated by dividing your monthly debt by your gross monthly income. You should maintain this as low as possible, which means you should only borrow money if required.
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