A personal loan can be beneficial for someone who needs urgent financial help. Since it’s a personal loan, a borrower can use the loan amount for any of their expenses. Now, applicants are often worried about the lender’s loan eligibility criteria. While lenders have set standards for those applying for personal loans, there are simple ways in which one can effectively boost their eligibility for a personal loan.
Here are 5 simple ways in which one can improve their loan eligibility:
1. Choose a long repayment tenure
A short repayment tenure would mean higher EMI payments. Some borrowers prefer this as they can repay the loan faster. However, if the goal is to improve personal loan eligibility, choosing a short repayment tenure is better. This is because selecting a temporary assignment mellower EMI payments over boosts the borrower’s repayment capacity. This reduces the lender’s risk, and as a result, improves the borrower’s eligibility.
2. Maintain a high credit score
Financial experts stress the importance of a good credit score, and with good reason. Financial institutions always look at an applicant’s credit score before approving their application. Lenders offer the best deals to borrowers who have decent credit records. This can include the borrower being offered a higher loan amount or a lower personal loan interest rate.
3. Declare all additional sources of income
Financial institutions always look at an applicant’s repayment capacity before giving them a loan. This is why declaring other sources of income can help in improving their eligibility for a personal loan. Lenders can find it easier to trust a borrower to repay a loan on time when they have multiple sources of income.
4. Avoid applying for other loans simultaneously
It is never a good idea to apply for several loans simultaneously. Financial institutions make a hard inquiry with a credit bureau whenever an individual applies for a loan. This is done to understand the applicant’s risk of defaulting on the loan. Too many hard inquiries can make a borrower look credit-hungry, which is unsuitable for a lender. So, it is better not to apply for multiple loans and not dampen the chances of a personal loan application getting approved.
5. Lower the debt-to-income ratio
Before applying for a personal loan, a borrower should always ensure that their debt-to-income ratio is low. This means that most of their monthly income should not be used to clear existing debt such as previous loan EMIs or credit card bills. Having a low debt-to-income ratio can improve a borrower’s loan eligibility.
So, these are a few tips that can help improve a borrower’s eligibility for a personal loan. Please go through them before applying for a loan to improve your chances of loan approval.