Personal loans are one of the most popular types of loans in India. It is the option that many seek out the most in times of financial crisis. Personal loans are often the only way for working professionals in India to get the money they need. You can use these loans for paying off debt, a mortgage, a medical emergency, a vacation, and other capital needs.
Personal loans are the best option if you are looking to get credit without providing any security. It requires less paperwork and is easier to apply. So, if you are planning to apply for a personal loan, this article is for you.
What is a Personal Loan?
Personal loans are kind of unsecured loans. They are offered with little documentation and without the need for collateral or guarantee. You can use the money from this loan to meet your financial needs. However, you must meet the eligibility requirements to obtain a personal loan. You can also use a personal loan eligibility calculator to check if you are qualified for it or not.
Eligibility for Personal Loans
The personal loan eligibility requirements differ from one lender to another. However, the following are the standard eligibility criteria for a personal loan in India:
- Applicants for personal loans must be between the age of 21 and 60.
- You should be an Indian citizen.
- You should have a minimum of 12 months of work experience.
- You should be employed at your current company for more than six months.
- Your monthly income should be at least Rs. 25,000.
How to Improve the Chances of Getting a Personal Loan?
The last thing you want when applying for a personal loan is for the lender to reject your application. To overcome that, there are several ways you can boost your chances of getting a personal loan approved.
Here are some tips you want to take to improve your chances of getting approved for a personal loan when you apply.
Make Sure You Prequalify for a Personal Loan
Prequalification is an important thing to look for because it lets you look into your loan options without affecting your credit score. A soft credit enquiry, as opposed to a hard credit enquiry, won’t affect your credit score. It’s an efficient approach for evaluating various lenders before applying.
Even though each lender has its own rules, many of them look at the following things when deciding whether or not to give you a loan:
- Credit score
- Credit history
- Existing numbers on credit cards
- Employment of credit
- Education and work experience
Have a Good Credit/CIBIL Score
Your chances of getting a personal loan and its interest rate depend on your credit, or CIBIL score. You may find it more convenient to get loans if you have a good or exceptional credit score. Your chances may be lower if you have a weak or low credit score. Make sure you review your credit record. There can be mistakes that need to be fixed before you apply for a personal loan.
Increase Your Income
Your lender will consider your debt-to-income ratio before giving you personal loan approval. The maximum loan amount offered rises along with your income. People with higher income levels are less risky than people with lower incomes. You will be able to repay the loan easily as your income rises.
Include all of your sources of income, like dividends, business profits, and other income, to increase the chances that your loan will be approved. The risk posed to lenders decreases as income increases.
Do Not Apply for Multiple Loans
People typically apply for personal loans with several banks and NBFCs when they need money urgently. It is done to enhance the chances of receiving a loan as quickly as possible. However, your lender can see these multiple loan applications through a hard enquiry of your credit history. When you have too many hard enquiries open at once, your credit score goes down. Likely, the lenders won’t approve your loan in such a case. Also, sending out multiple loan applications could get you turned down more than once, affecting your credit score.
Set a Loan Amount You Can Repay Easily
A loan application will be rejected if you request a credit limit larger than what you can repay. Since there is no requirement for security with a personal loan, you should consider your sources of income. Apply only for an amount that you can comfortably repay.
Since you will only be paying interest for a limited period, a shorter loan term can save you more money. However, taking out a loan for a shorter period will require you to make larger monthly payments. So you must consider this while determining the loan term that is best for you.
Apply With a Cosigner or Joint Applicant
What if you don’t have the credit or income record required to apply for a personal loan? You can ask someone with a high income or better credit score to cosign or jointly apply for a personal loan. The majority of lenders for personal loans accept cosigners and take their qualifications into account when determining whether to issue a loan.
You and the cosigner or joint applicant will both apply for the loan and be equally responsible for paying it back. Also, cosigned loans are less risky for lenders because there are more people the lender can try to get payments from.
You can improve your chances of getting a loan by being aware of the points mentioned in this blog. Consider your loan application from the lender’s perspective. Make changes and improvements if you find any factors that could reduce your chances of being approved for a loan.
Moreover, research and apply only for the personal loan that suits you best. And visit our website to read more such blogs on loans and personal finances. You can also check out the housing and personal loan sections if you plan to get one.