A personal loan is one of the most popular loans available in India. This loan is both unconditional and unsecured which makes it quite in demand among borrowers. There are several lenders who give out personal loans both online and offline which has simplified the loan application procedure. Lenders have put in place strong lending criteria to provide a safety net for loan applications.
There are many factors that a lender considers while lending for a personal loan. If you do not have a very strong application, there are a few steps you can take to ensure your application is not rejected outright. Each lender has personal loan eligibility criteria which it clearly displays on its website. These eligibility criteria are firmly set. You can keep working to improve your criteria over a period and then make a loan application when it improves.
Here are a few steps to improve eligibility:
- Settle credit card debt:
Your credit repayment history forms a huge part of your loan application. Precisely why it is important to clear out all types of credit card debt before applying for a loan. Credit card debt shows in your credit report and having outstanding debt can be a hindrance to your loan application.
- Apply only for what you need, not what you’re approved for:
Banks and financial institutions tend to pre-approve you for loan amounts higher than your requirement. Even though this is tempting, a pre-approval does not mean loan acceptance. If you apply for more than your requirement and you can’t justify the reason for the fund requirement, your loan application can get rejected. That’s why it is better to assess your fund requirements carefully and then apply only for the amount you require.
- Check and correct your credit score:
Your credit score is a very important part of your personal loan application. In India, credit scores can range from 300 to 900 with 900 being the highest. Any credit score above 750 is excellent. Before applying for a personal loan, make sure to take a copy of the credit information report and check for accuracy of transactions. This way you can be sure that the credit score is updated.
- Don’t have multiple credit cards:
Having many credit cards is seen by lenders as a person being money hungry. However, having credit cards itself is not a reason to reject a personal loan. If you do maintain multiple credit cards to accumulate cashback points or airline miles, it is best to ensure their spends are completely repaid and this reflects in your credit report. A clear credit report improves personal loan eligibility.
- Provide a guarantor:
One way to strengthen your loan application is to provide a guarantor for your loan. If the guarantor has a strong financial record, it will provide additional safety to the lender. However, an important point to consider is that in case you miss repayments, then the guarantor’s credit score will be impacted.
- Close as many unsecured loans as you can:
Unsecured loans are a big risk for lenders who are looking to give borrowers personal loans. Many unsecured loans means the person is desperate for cash and this may cause problems in repayment. Once you repay these unsecured loans, it will signal to the lender that you have funds to repay.