A personal loan can be used for a variety of reasons, right from buying anything expensive, to paying for vacations, tuition, medical emergencies, and so on. Personal loans are used for a variety of purposes and are usually provided without collateral. This is also the reason why personal loans are popular and in addition to this, interest rates are also usually fixed. However, as is the case with all kinds of loans, some people are more eligible to procure it as compared to others.
If you are someone who feels that you may not be eligible for a personal loan, do not worry. Given below are 10 tips that will help you to increase your loan eligibility factor and thereby have a greater chance of procuring the personal loan.
1. Consider paying off your existing loans – If you have other loans such as car loan or any other loan and if your capacity permits you to do so, pay off the loans to create a positive impact on your credit and also to allow more room in terms of available residual incomes for lenders to take into consideration. Doing so also helps in clearing off your loans and increasing your overall creditworthiness. When your total liabilities come down, you will have more disposable income in your hand on a monthly basis. Hence, you will be able to make loan installment payments with ease and your loan application will be approved without much hassle.
2. Retrieve a copy of your latest credit report – Before applying for any loan, you get a copy of your latest credit report from CIBIL, Experian, or other sources and look out for your score and discrepancies (if any). If you find any errors such as incorrect personal information of a wrong entry, approach the bureau immediately to have the information corrected since they have the potential to act as spoilers when you apply for a personal loan. Once you approve the credit bureau to correct your credit history, wait for them to publish the corrected report, and then apply for the loan with the corrected report.
3. Add your spouse or parents as co-applicants – This is one of the most preferred routes taken by applicants to add weightage to the loan application. By adding your immediate family members as co-applicants, you not only add additional monetary impetus to the loan application but also provide that extra layer of security to lenders, thus increasing your monetary eligibility. Even if you have a low credit score, you might get a personal loan when you apply along with a co-applicant or guarantor.
4. Go for a Longer Tenure – Though the interest charges to be incurred will be higher, choosing a longer-term can help you in getting a loan amount of your choice. In fact, if you are not happy with the amount approved, speak to the representatives from the bank to confirm if you can choose a bigger term and be eligible for a higher quantum of loan. Moreover, when you opt for a longer tenure the EMI to be paid each month decreases. It will become a lot easier to pay off the loan with your existing income and the lender will also be more likely to approve your loan application.
5. Declare all your sources of income – If you have other sources of income such as rentals and dividends drawn on investments, let the lenders know it so that it is taken into consideration. Future Bonuses (if any) can also be discussed with the representatives to add weight to the loan application. When the lender gets a clear picture of the actual amount of money that you earn in a month or year, they can easily assess if you will be able to pay off the loan and also how much money can you borrow. This will help in making it easier for you to get the loan approved.
6. Ensure that you only opt for a reputed lender – A loan comes with the additional cost such as processing fee, late payment fee, pre-closure fee, etc. Also, a personal loan is a long-term affair and if you do not pay it off on time it will adversely affect your credit score. Thus, you should only approach a reputed lender who offers favorable terms and conditions. By doing so you will more likely to get the personal loan application approved and in the long run, you can be assured that paying off the borrowed amount will not be a big hassle.
7. Improve your credit score before applying for the loan – The credit score is one factor that you will need to improve on as this is the first factor that banks and financial institutions take into consideration to assess your eligibility for the loan. You can improve your credit score by paying all your bills on time and in full and not spending more than the credit limit on your cards. Other ways to improve the credit score include making payments on time, paying off all debts, reducing the overall utilization of total credit available on credit cards, and so on.
8. Make sure that you provide all necessary documents – along with your loan application, you should make sure that you also provide all the related documents that the banks require to approve your loan application. Documents such as proof of income, proof of address, employment proof, proof of identity, copy of PAN card, etc should be enclosed with the loan application. If you are applying for a loan online, you will need to upload these documents so that your loan application can be processed fast by the lender.
9. Approach a third-party lender – Traditional lenders have very strict eligibility criteria and so you might find it difficult to get a loan from them. Hence, you can approach a third-party lender online to increase your chances of getting the loan. These lenders do not have rigid approval criteria and will be more likely to approve your personal loan application.
10. Plan your repayment options in advance – Even before you apply for the loan, you should plan your repayment options. This will help you to make sure that you have the required money to pay off the loan installment payments every month. The lenders will most likely ask you about your ability to pay off the bowered money and if you already have a plan it will be easier for you to convince them that you will not default on your loan payments. If you follow these tips, you will not have a lot of difficulty in getting your personal loan approved by the lender.