Personal loan is one of the most viable credit options to opt for in times of financial emergencies. With quick disbursal, no collateral requirement and zero restriction on end usage, personal loans can be exceedingly beneficial for mitigating your urgent financial crunch. However, to qualify for a personal loan, applicants should meet the lender’s personal loan eligibility criteria.
Here are 4 ways to enhance your personal loan eligibility
- Keep a regular check on your credit score
Generally, loan applicants with a higher credit score equaling 750 or more are eligible to avail loan at a lower interest rate than those with lower credit score of below 750. Given that the requirement for personal loan is uncertain in nature and can come up anytime in case of financial crunch or immediate monetary requirement conditions, reviewing your credit score just before personal loan application may be of no help.
Note that building a good credit score takes ample time and requires periodical reviews to check errors, discrepancies, and your credit behavior. Periodical reviews also render one with substantial time to take apt steps to ameliorate the credit score, which thereby helps increase your loan eligibility prospect. Some of the crucial measures to form a good score are ensuring full and timely credit card and loan EMI repayments, maintaining a balanced mix of credit between the secured and unsecured loans, keeping the CUR (credit utilization ratio) under 30 percent and monitoring the cosigned/guaranteed loan accounts periodically.
- Ensure to review your EMI affordability
Most of the lenders require their applicants to have an FOIR (fixed obligations to income ratio) including the personal loan EMI to be under 50 to 60 % of their monthly income. Applicants surpassing this set limit have reduced chances of personal loan approval. Thus, personal loan applicants should assess their EMI affordability by reducing their new and their existing EMIs, mandatory monthly expenditures, insurance premiums etc. from their monthly income. Once you are aware about your EMI affordability, select the shortest tenure as per your affordability to lower your overall interest outgo.
- Avoid direct credit enquiries with numerous lenders in a short span
When you apply for personal loan or any other credit option, financial institutions (banks/NBFCs) raise direct inquiries with credit bureaus to assess your creditworthiness and know your default risk. These inquiries are addressed as hard inquiries for which the bureaus reduce your credit score by a few points. Submitting multiple such direct credit inquiries within a short period of time can be detrimental to your long-term financial health because doing so not just lowers your score by a massive margin but also reduces your personal loan eligibility chances.
Instead of placing your personal loan inquiries to lenders directly, consider visiting online financial platforms to compare as well as select the suitable personal loan lender according to your eligibility and financial need.
- Add a co-applicant
Insufficient income, low credit score of below 750, FOIR of over 60% of monthly income or failure to fulfil any other personal loan eligibility set by banks/NBFCs can either result in loan application rejection or loan approval at a higher rate of interest. You can add a co-applicant with a strong credit profile, high credit score, stable income and satisfactory repayment capacity to reduce the lender’s credit risk. It is because the co-applicant is also equally liable to repay the personal loan on time. This will help enhance the loan approval chances of the primary loan applicant. Including a co-applicant can also help you avail higher loan amounts, if required. However, remember that any delay or default in personal loan EMI repayment would not just negatively impact the credit score of the primary applicant but also that of the co applicant.
If you are financially unprepared, emergence of any big-ticket monetary exigency might drain out your savings, or at worse, negatively affect your long-term financial health. This is where personal loans can come in handy.
As personal loans are a prudent source of availing funds, they have become exceedingly popular among many individuals. However, to qualify for an online personal loan you need to meet the lender’s eligibility criteria, which can be attained by following the above-mentioned tips.