A personal loan is one go-to debt instrument in times of need. Be it a planned expense or a sudden emergency, a personal loan is a convenient and reliable option for immediate financing. However, the terms of the loan are completely dependent on your financial profile and various other factors considered while approving a personal loan application.
Once you apply for a loan, the lender takes a dip into your personal profile and credit profile to determine whether or not to extend a loan to you. However, what if you could carry out a check pre hand to minimise the chances of loan rejection?
To improve your chances of Personal loan approval, enlisted below is a checklist you can refer to before applying for a personal loan with any lender –
Credit Score check
If you wish to avail a personal loan at best of the interest rates, a credit score of 700 and above is most likely to fetch you the same. If your credit score is below 600 you may get a personal loan, but not necessarily at your desired terms. Your credit score is perhaps the most important factor considered by all lenders. It is the reflection of how responsibly you service your loans and debt instruments. Thus, one must focus on improving their credit score before applying for a loan of their choice.
Read more about credit scores – Top 9 Myths About CIBIL Score Debunked!
It is important that you check with the listed personal loan eligibility criteria of the respective lenders. Age, income, operational cities and employment type are certain parameters under the basic personal loan eligibility criteria that a borrower must qualify under, before even applying for a loan. Eligibility criteria of each lender may differ from one another, however, basic parameters for reviewing an applicant remain the same.
Repayment capacity Check
It is of utmost importance that you avail a personal loan well within the capacity of being able to repay it. Also, you certainly don’t want your debt to income ratio to exceed a mark of 50% as it would affect the credibility of your credit profile. Choosing the right tenure in such cases plays a major role in reducing the burden of heavy EMIs. Space out your personal loan repayments over a long tenure to reduce the monthly EMI.
Flexible repayment options check
Lenders are making personal loans more and more affordable for borrowers. Choosing flexible repayment options can help you make the monthly installments more fit to pocket. It can help make room for other monthly expenses like food, rent, utilities, fees and so on. A low monthly EMI will reduce the chances of defaulting on the payments as the payments are more affordable and suited to your profile.
Read more about repayment plans – A Guide to Understanding Loan Repayment Plans offered by LoanTap
Right Lender Check
People often fail to carry out a proper research regarding the right lenders, interest rates, tenures and so on. Also, borrowers in dire need or finances end up applying at multiple lenders at one time. Certainly not the right thing to do. Applying with multiple lenders will affect your credit score as each lender would reach out to credit agencies to access your credit profile. Instead, you must carry out the necessary research pre hand and short list your desired lender. And yes, ensure you abide by ‘One application at one time’ rule at all times!
Read about choosing the right lender – How to Choose a Good lender for your financial needs?
Carrying out a check as per the above checklist works more like a screening process where you can ensure that you can cross check and eliminate those factors that could later be a reason for rejection. In a way, these measures can help you come a few steps closer to your personal loan approval!