A Personal Loan is one of the best financial products as it helps you to cover various planned and unplanned expenses. Right from funding your child’s higher education and paying off your multiple debts to taking on a Personal Loan for self-employed, you can use the funds to meet any of your financial obligations.
There are various banks and Non-Banking Financial Companies (NBFCs) that offer online personal loan for salaried employees with basic eligibility criteria. Most top lenders have simplistic terms and conditions to sanction a loan and their disbursal time is also shorter. The loan amount gets credited directly to the bank account within the same day.
However, non-compliance with Personal Loan eligibility criteria can lead to your loan application getting rejected.
So, to ensure fast loan approval without any likelihood of rejection, check out these 5 tips to improve your chances of availing of a Personal Loan:
- Apply for a Reasonable Loan Amount
Applying for a loan amount more than you can afford to repay can lower your chances of getting loan approval. Consider all your income sources and financial obligations to decide the loan amount that you can comfortably repay. This will eventually make the loan repayment easier and help you avoid the risk of payment defaults. To decide the right loan amount, you can also use the Personal Loan Eligibility Calculator. This online tool tells you precisely the amount you’re eligible to avail based on your existing debts, income, credit score, etc.
- Fulfill The Personal Loan Eligibility Criteria
You should apply for a Personal Loan with a lender only if you meet their basic loan eligibility criteria. A common mistake made by most applicants is that they apply for a loan without checking the lender’s eligibility criteria in the hope of getting fast loan approval. This often results in loan rejection, and it takes a significant toll on your credit score as well. That is why you must check the lender’s personal loan eligibility criteria before you apply for one to avoid loan rejection.
- Improve Your Credit Score
Lenders often consider your credit score when deciding whether to approve your loan application. Your credit score shows your creditworthiness and the score is calculated based on your income, existing debts, past repayment behaviour, etc. It’s a 3-digit numeric summary that ranges between 300 and 900. The higher the score, the better the chances of getting fast loan approval. Also, it may help you avail of a loan at a low-interest rate.
A credit score of 750 and above is ideal to get approved for unsecured loans. That said, if your credit score is below this range, it is best to wait and improve your credit score by paying off your outstanding dues on time and keeping the credit utilization ratio under 30% of your limit.
- Consider Your Fixed Obligation to Income Ratio (FOIR)
Another major important factor that lenders use to decide on your loan application is your FOIR or debt-to-income ratio. As its name suggests, this ratio shows how much debt you have against how much you earn. A lower FOIR means you have fewer liabilities, better repayment capacity, increased disposable income, and higher chances of loan approval.
Ideally, your debts should not exceed more than 40% of your income. If your ratio is high than that, pay off some debts before applying for a new one. In addition to this, don’t apply for a loan amount that you cannot afford to repay.
- Consider a co-signer
If you have a poor credit score or limited credit history, you may be able to increase your chances of getting approved for a Personal Loan by adding a co-signer to your loan application. A co-signer is someone who agrees to take responsibility for the loan if you are unable to make payments. Keep in mind that the co-signer will also be responsible for repaying the loan if you default. So, if your co-applicant has a high credit score and a steady source of income, adding them will certainly improve your chances of getting a Personal Loan at attractive terms.
Before you apply for a Personal Loan, make sure you choose a reputed lender. It is always smart to shop around and compare for low-interest rates and offers. Also, do follow these tips to ensure your Personal Loan gets approved.