Golden Ways to Increase Your Loan Eligibility
Due to an increase in delinquency rates for unsecured credits like personal loans, lending institutions have now laid down stricter eligibility norms. While some financial institutions still provide advances against simple requirements, checking the eligibility criteria and adopting ways to meet them only helps borrowers avail a loan at favourable terms.
As such, they can focus on improving their loan eligibility, which will also increase their chances of receiving approval for personal loans without any hassle.
One can thus follow the steps given below to increase their personal loan eligibility. Before that, take a quick look at the standard eligibility requirements asked for by lenders.
Common eligibility criteria for personal loans
Even though the criteria for personal loans may vary slightly for each lending institution, there are some necessary eligibility conditions that every applicant must meet. These include –
- Age – Applicants should be within the age of 23 to 55 years.
- Nationality – They should be residing citizens of India.
- Employment status – They should be salaried applicants employed with an MNC, public or private company.
- Credit score – Minimum 750.
- Income – Minimum income threshold as per their city of residence.
Tips to improve the eligibility for personal loans
- Take measures for CIBIL score improvement
Since personal loans are unsecured advances and do not require any collateral; lending institutions use CIBIL score to check borrowers’ credit profile for loan application assessment. The credit score is a numerical summarisation of an individual’s credit report.
It is a measure of borrowers’ creditworthiness, and as such, those who have high credit scores portray low risk by lending institutions, which improves their personal loan eligibility.
On the other hand, a low credit score suggests that the individual may have defaulted credit repayment, which increases the risk of default. In that case, you need to know how to get a personal loan when you have a poor credit score. Apart from that, you can also implement the following measures that can help boost your credit score –
- Keep your credit utilisation ratio within 30% of the available credit limit.
- Do not apply for multiple credit cards or loans successively.
- Pay off all your debts in time.
- Opt for a healthy mix of secured and unsecured credit.
Following a strict credit discipline over time helps improve your creditworthiness and the consequent loan eligibility.
- Document all income sources for improved repayment capacity
Apart from the CIBIL score, income is another significant factor that affects one’s eligibility for personal loans. Thus, documenting all income sources, when applying for an advance, helps improve your capacity to repay.
It also helps portray a low debt-to-income ratio to the lender. Debt to income ratio is the percentage of an individual’s income that goes towards servicing his or her existing debts.
Borrowers with a low ratio are considered more eligible for a loan since they hold a higher repayment capacity. You should keep your debt to income ratio at a maximum of 50% or below to increase your personal loan eligibility.
- Prove your employment stability
Applicants who are employed at a reputed firm or public sector company with extended work experience are considered financially stable, and therefore, portray a better repayment capacity. Thus, you can leverage your employment stability to improve personal loan eligibility and avail the advance at favourable terms like low rates of interest.
Some other effective ways to improve personal loan eligibility are –
- Applying with a co-applicant holding a high credit score.
- Repaying existing debts before applying.
- Opting for a long tenor for repayment.
- Applying for an amount lower than existing eligibility.
Apart from following these steps, you can also apply for a loan with your current lender.
It is because some financial institutions such as Bajaj Finserv provide pre-approved offers to their existing customers for hassle-free loan processing. Besides personal loans, such offers can also be availed on other unsecured financial products like business loans and credit cards. You can check your pre-approved offer by entering only a few necessary details like your name and contact information.
You can also use a personal loan eligibility calculator to check the amount you can qualify for before applying. It will enable you to choose a loan amount that suits your repayment capacity and keeps EMIs affordable. Make sure to check how to apply for a personal loan and keep the required documents handy for a streamlined loan application and processing.