5 Easy Ways to Boost Your Personal Loan Eligibility

Personal loans are one of the most common types of credit that can help you meet your financial needs. These loans have gained huge popularity as they come with no restrictions, no collateral and high flexibility in terms of use and repayment. Today, you can apply for an instant personal loan through a loan app, from anywhere and anytime. If you meet the lenders eligibility criteria, then the loan amount would be disbursed into your account within a few hours.

Since, personal loans are unsecured loans, meeting the lender’s eligibility criteria is very important. Most lenders check your age, income stability, employment stability, credit score, monthly income, ongoing debts, and past financial records, to estimate the risk associated with your loan application. They may reject your loan application or offer you the loan at a much higher interest rate. Thus, it is important to meet your lender’s eligibility criteria.

Read on to know the eligibility criteria for a personal loan and how you can improve your personal loan eligibility.

What Are the Eligibility Criteria for a Personal Loan?

Before we move towards our tips on improving your personal loan eligibility, let’s first take a look at the personal loan eligibility criteria.

• You must be a citizen of India.
• You must fall between the age of 21 to 58 years.
• A personal loan is open for both salaried and self-employed individuals.
• You must earn at least ₹15,000 per month to be eligible for a personal loan.
• You must have a decent credit score.
• Your debt to income ratio should be less than 50%.

Tips to Boost Your Personal Loan Eligibility

Here are five smart techniques to increase your eligibility for personal loans:

1. Improve Your Credit Score

Your credit score is one of the most crucial qualifying requirements that any lender checks before approving your loan application. Your credit score reflects your credit worthiness and your past credit activity. Having a good credit score means you have always maintained a good repayment discipline. This reduces the lender’s risk and raises your likelihood of getting approved.

In case, your credit score has suffered due to negligence in the past, then you can work towards building your credit score. First, get your detailed credit report from your credit bureau. Check for any errors or discrepancies in the report, close a few on-going loans, consolidate your debts, manage your credit card usage, and do not apply for loan with multiple lenders at once. Once you start taking these steps your credit score shall improve within 3 to 6 months.

2. Don’t Apply for Multiple Loans at the Same Time

Lenders do a mandatory credit report query when you apply for a personal loan to determine your default risk. These inquiries are included in your credit report as hard inquiries. Therefore, applying for several loans at once is a bad idea since it suggests that you are credit-hungry.

You become a high-risk candidate who is desperate for an instant loan. This makes them skeptical about your financial situation and the lender might decline your loan application. It is therefore essential to weigh your possibilities, use an eligibility calculator available on the lender’s loan app, and only apply for a loan if you are eligible for it.

3. Provide All of Your Revenue Sources While Applying for the Loan

Your income is one of the most important factors when it comes to your instant loan eligibility. It is considered essential as it aids the lenders in determining your capacity to repay the loan. It’s crucial that you include all of your revenue sources—not just your salary—for this purpose. Make sure to mention other sources of income like income from investments, rental income, any side business income, freelancing income etc. However, you will have to provide the lender with documents supporting your income proof.

This will assist you in showing the lender that you have the resources needed for timely repayment. Also, since you are not dependent on just one source of income, the risk associated is also diversified over multiple sources. In simple words, a higher source of income means you are financially sound to make payments and can manage your monthly expenses.

4. Apply with a Lender who has Easy Eligibility Requirements

To maximize your chances of getting approved, apply at a bank that meets the minimal requirements for personal loans. The eligibility requirements usually revolve around your age, income, employment, and your citizenship. You can find these eligibility requirements on the loan app or on the lender’s website. The simple the eligibility criteria, the easier it is for you to get approval.

Make sure to go through the eligibility criteria carefully and apply only if you meet all the requirements. Not meeting the eligibility requirements or submitting false details can lead to loan rejection. This will again impact your credit score.

5. Ensure That You Make All Your Credit Card and Loan Payments on Time

Be careful to pay off current debt before applying for a personal loan as this will raise your debt-to-income ratio. It won’t be simple for you to service another loan if you currently have several loans and on-going credit card bills. This makes the lender think that you don’t make enough money and that you would put off or skip payments.

If you are paying off a single loan at the time you apply for a personal loan, a debt-to-income ratio of 15% is excellent. If you have several loans to pay back, the total of your EMIs shouldn’t be more than 50% of your income. A higher debt-to-income ratio means that you are buried in debt and giving you another loan is a big risk.

Conclusion

A personal loan is a very helpful financial tool that can come to your aid in fulfilling your loan requirements. But you must fulfill the lender’s eligibility criteria to be able to avail this loan. It is always a wise financial move to work on your loan eligibility parameters and keep all your details handy just in case you find yourself in need of an instant loan. Just download a loan app and keep a tab on the eligibility details and loan offers.