Personal loans are unsecured loans and are expensive. So, one should avoid such high-interest loans unless it’s absolutely necessary.
However, without any collateral security, getting a personal loan is a difficult task as lots of eligibility conditions to be fulfilled to get a loan sanctioned.
“An instant loan assists individuals to meet their financial requirements. Such a loan is useful if you have unforeseen expenses to address especially in the short- or medium-term period,” says Rohit Garg, CEO and co-founder, SmartCoin.
Garg lists the following 5 tips to improve your chances of getting that loan application approved:
1, Decrease your debt-to-income ratio
Make sure that you pay off your existing debts and credit card bills to reduce your debt-to-income ratio before applying for a personal loan. Preferably, the total amount of EMIs that you are liable to pay every month should not exceed 30-40 per cent of your monthly income.
2. Improve your CIBIL score
You must also have a commendable CIBIL score for any instant loan request to be sanctioned. A credit score is a 3-digit number that reflects your creditworthiness to the lender and aids in gauging your risk of default. It underlines how you have managed your finances and bills in the past. The lesser the score, the lower are your chances to gain a good deal on your loan application and vice-versa. Most lenders in the country depend on the CIBIL score, which ranges between 300 and 900. A credit score that is more than 725 is affirmed as a desirable score.
3. Include all sources of income
Lenders like to view an applicant’s total income to gauge his or her repayment capacity. Therefore, while filling up the online loan application form, it is recommended that you include not only your regular salary but also additional sources of income like rental income, part-time income, etc.
4. Do not apply for multiple loans at one go
If you apply for numerous loans at one go, all the lenders are likely to initiate multiple hard inquiries on your credit report. This will automatically bring down your credit score. Since you may come across as an insatiable borrower, your loan application may also face rejection. Therefore, it is better to apply for one that best fits your requirements and personal loan eligibility after comparing all the options at hand.
5. Select a lender with the eligibility criteria you can fulfill
Verify the various eligibility conditions of different lenders and choose the one whose eligibility criteria you can fulfill, instead of applying to multiple lenders simultaneously only to learn that you are ineligible for all of them.