The Ultimate Guide on How to Ace Your Personal Loan Application by Improving These Eligibility Factors!
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27 DECEMBER, 2021
It is often an unpleasant experience to get your personal loan application rejected. However, not many know that one of the reasons for rejections is applicant’s low eligibility. If the lender finds that you are not eligible and are barely meeting the loan eligibility, they choose to reject the application. Therefore, the best way to avoid getting your application rejected is to know the factors that affect your eligibility and to ensure that you meet the lender’s criteria. Here is a guide to help you improve your eligibility and ensure the approval of personal loan applications.
It reflects the percentage of your income spent towards paying debts and EMI. Usually, lenders prefer a candidate whose debt to income ratio is below 40%, as a percentage higher than that can denote a greater risk of default. You can find your debt to income ratio by dividing total debt by your income.
Lenders can reject your application, if your debt to income ratio is too high. To avoid that, you must keep it below 40%. It would be best to pay off some of your debts before applying for a personal loan to enhance your repayment capacity and eligibility.
Your credit score reflects your creditworthiness and repayment capacity. Through your credit score, the lender judges if you will be able to pay the EMI on time and if it's safe to lend you money. Typically, you must have a credit score of 750 and above to get a personal loan at attractive interest rates. To enhance your personal loan eligibility, you must maintain a high credit score. Pay your credit card bills and EMIs on time and check your credit report. If there are mistakes in your credit report, it would be best to get them rectified.
Your income is a significant determinant of your eligibility. Lenders consider your income to understand if you would be able to repay the loan. If your income is below their set limit, they can reject your application. As a personal loan is unsecured, lenders rely on your income to judge your repayment capacity. It would be best to mention all sources of income and not just your salary. You can add rental or interest income or income earned from any other sources.
Having a co-applicant can substantially enhance your loan eligibility and improve chances of approval. You can take a personal loan with your parents or spouse. Lenders club the income and credit score of your co-applicants to determine your eligibility. Therefore, to improve your chances, you can apply for a joint personal loan.
You might be tempted to apply for multiple loans simultaneously to ensure that you get approval from at least one of them. However, it can project you as credit hungry and affect your credit score. Avoid applying for multiple loans in a short period. It would be best to wait for a few months after you have applied with a lender. Knowing these tips will enhance your eligibility and can help in getting a loan approval.
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