Personal loans are popular among borrowers because they are easily available and require no collaterals or guarantors. However, despite being easy loans, lenders have some Personal Loan eligibility criteria for borrowers of personal loans. Only borrowers who fulfil the prescribed eligibility criteria are granted a personal loan. In fact, the amount of loan which the lender would allow and the interest rate which would be charged depends on your loan eligibility. Do you know how you can improve it?
There are ways in which you can improve your Personal loan eligibility and avail higher amounts of loan at lower interest rates. Here they are –
1.) Improve your credit score:
If you are looking for a personal loan, you must be familiar with the concept of credit score. Credit score measures your creditworthiness. It tells the lenders how financially capableand also enables the lenders to accurately estimate your loan eligibility. you are to pay off the loan in full. Generally, Aa score which isof more than 700 is considered to be a good score. Lower scores are bad scorestypically mean higher chances of which either result in rejection of your loan (if the score is below 500 or 600) or getting a loan at higher interest rates. So, the first step in improving your loan eligibility is improving your credit score. To do that you should –
- Ensure timely repayments of existing credits
- Have a good mix of loans (Secured and Unsecured)credit products in your portfolio
- Avoid defaulting on credit cards or any other loans
- Avoid using a high/full credit limit
If these steps are taken, your credit score would improve improving your loan eligibility as well.
2.) Make a joint loan application
If your spouse is an earning member, make a joint application for the loan. In that case, your spouse’s income would be added to your income. The total income would, therefore, increase and hence your personal loan amount eligibility will increase. This would increase the amount of loan which you can avail and reduce This should also help you avail low interest personal loan from the lender.
3.) Have a steady source of income
Your income is an important parameter against which the personal loan is granted. If you have stayed at the same job for a longer period, you improve your loan eligibility. Continued employment shows a steady source of income and acts as an additional comfort for lenders. This steady source of income, therefore, increases your loan eligibility.
4.) Have a high net income
When determining your loan eligibility based on your income, your take home income is taken into consideration, not your gross income. If your net income is high, your loan eligibility would be high and vice versa.
5.) Choose your lender carefully
Different lenders have different eligibility criteria. So, when you decide to apply for a personal loan, choose a lender who offers you the maximum amount of loan. Shop around before finalising the lender. If you have an existing relationship with a bank or non-banking financial institution, use this relationship to your advantage. Financial institutions often give a concession on the interest rate for existing customers. So, be careful when choosing your preferred lender as your choice would also determine your loan eligibility.
6.) Have a valid reason for the loan
Though personal loans are granted for any personal or business use, lenders often ask the purpose of the loan. Lenders have a list of purposes which they allow as a use of personal loan. Banks will not approve your loan application if you intend to use the proceeds of the loan for speculative purposes Similarly, banks may be more if the purpose of the loan is a financial emergency, lenders are more favourable towards the loan proposal. However, if the loan’s purpose is something which is not an emergency (like taking a foreign trip or for making a luxury purchase), the loan applications are not viewed favourably. So, have a valid reason for seeking loan.
These points, if followed, help in increasing your loan eligibility. Each of the steps above can help you get a higher loan eligibility and allow you higher loans at lower rates.