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20 JULY, 2022
A personal loan is a quick solution for people who need immediate funds without pledging any security or collateral. Applying for a personal loan is easy as you simply need to fill in your basic details and submit them online to get instant approval. However, it is important to keep in mind that just because the application process is quick and easy, it doesn't mean your loan will be automatically approved.
To qualify for the loan, you are required to meet the personal loan eligibility criteria set by the lender, in the absence of which an approval can be delayed or denied. The personal loan eligibility criteria can include your credit score, income and employment history, and debt-to-income ratio.
Here are some important tips that can help you boost your personal loan eligibility and get approval for your loan application:
Ensure timely repayment of your existing card bills and loan Equated Monthly Instalments (EMIs) before submitting a personal loan application to a lender. A consistent record of timely repayment of loan EMIs and credit card dues ensures a good credit score. Moreover, a good credit score also helps you get the best personal loan interest rate. So, do not miss out on paying any EMI as it would reflect in your credit report, thus impacting your credit score.
Try to provide the lender with a complete picture of your financial situation to increase your chances of getting an instant personal loan. Besides your regular job, mention any other sources of income, such as investment income, rent, freelance income, etc. Remember that your lender may ask you for proof of income, such as income tax returns.
The Fixed-Obligation-to-Income Ratio (FOIR) is an important metric used by lenders to assess your loan eligibility. A high FOIR indicates that a high percentage of your income is going towards meeting your fixed financial obligations. On the other hand, a low FOIR means you have sufficient disposable income, and your monthly financial obligations are lower than your overall income. While the exact ratio varies from lender to lender, it is generally recommended to keep your FOIR at 40% or below. To maintain a healthy FOIR, it is important to keep track of your monthly expenditure and plan your finances accordingly.
A longer repayment period will lower your monthly EMIs and increase the chances of timely repayment, thereby minimising the risk for the lender.
People generally apply for multiple loans when they do not get the required loan amount from a single lender and need more funds to meet expenses. Remember that lenders usually tend to lend to borrowers who can manage their finances well. Thus, too many loan applications can make you a risky applicant for a personal loan.
To sum up
While personal loans are a convenient financing option in crucial times, they also come with necessary personal loan eligibility criteria that you must meet. With these tips in mind, you can improve your loan eligibility and avoid rejection.
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