A personal loan is an unsecured credit facility in which individuals do not require to pledge or mortgage any collateral. Only by meeting simple personal loan eligibility requirements set by a lender can borrowers avail the required capital without any hassle. So, it is important that borrowers know how to improve their eligibility to ensure quick approval on their loan requests.
Ways to Enhance Personal Loan Eligibility
Here are some easy measures to improve personal loan eligibility:
1. Reducing debt-to-income ratio
Debt-to-income ratio is a parameter that scales individuals’ overall borrowings against their fixed monthly earnings. Lending institutions deem a debt-to-ratio under 30%-40% as ideal.
When an applicant has various financial obligations, including existing loans and credit card bills, the ratio becomes higher. So, they need to clear existing dues to reduce the ratio and improve eligibility for a personal loan.
2. Maintain credit score over 750
CIBIL score over 750 indicates that the loan applicant has an indisputable track record of repaying debts. Lenders assume such borrowers will not default on timely repayments, hence expediting the sanctioning process.
However, the credit rating agency updates this credit score from time to time. So, individuals need to follow financial discipline such as repaying dues timely and keeping the debt-to-income ratio low to maintain a healthy credit score and be qualified for a personal loan.
3. Applying for a joint loan
Borrowers need to meet the eligibility requirements, including minimum income and CIBIL score. Individuals who fail to meet these basic personal loan eligibility criteria can apply for the credit with a co-applicant. It can help them enhance their creditworthiness because, with mutual effort, the borrowers can repay the debt with ease. This is why they can get a higher loan amount at an attractive interest rate by opting for a joint loan.
4. Opting for a higher loan tenure
In an extended loan tenure, the instalment amount stays lower, and it can be easily managed by the borrowers despite their limited earnings. Apart from this, it also keeps the Fixed Obligation to Income Ratio (FOIR) lower. This helps individuals enhance their personal loan eligibility and get the credit amount sanctioned easily.
5. Avoiding multiple loan applications within a small time interval
Every time an applicant applies for a personal loan, the lender does an enquiry with credit rating agencies regarding the credit score. Every such enquiry reduces the credit score. Multiple applications within a short timespan will further reduce the score and thereby, decreasing chances of loan approval.
6. Declaring all income sources
For professionals or self-employed individuals, mentioning only the basic income will fetch them a paltry loan amount that may be inadequate. Individuals need to disclose all other income sources to avert this situation. These may include earnings from rent, investments, etc. As it improves the eligibility, applicants can opt to apply for a higher loan amount.
Keeping all these parameters in mind, individuals with financial shortcomings can now apply for instant personal loans via the online portals of their preferred lending institutions. Borrowers can improve their chances of availing loans by meeting the personal loan eligibility parameters. They can use a personal loan eligibility calculator to get an estimate of the amount they can avail in the form of a loan and apply accordingly.
The eligibility calculator considers an applicant’s income, monthly financial obligations, city of residence, employer details and age to compute an approximate loan amount he/she will be eligible for. Knowing this amount will considerably reduce chances of loan rejection which may otherwise happen in case you apply for an amount higher than your eligibility.
