Make Sure You are Eligible for Personal Loan in 2020 with these Tips
For a common person in India who is salaried, lives in an urban area on rent, it is hard to get a loan without any credit. Especially in situations where the money is required to meet any personal need or an emergency, a common man is not expected to get the loan from banks or financial institutions without any collateral. However, with the popularity of personal loans increasing each day, this fact is quickly turning into a myth.
A personal loan is designed specifically for salaried individuals who need funds to meet any personal need. Thus, a personal loan is availed for various purposes like travel, marriage, medical emergency, debt consolidation, purchase of any electronic or gadget, or any other personal need. Although there are certain criteria as well that needs to be for your personal loan eligibility.
Banks and financial institutions evaluate personal loan applications on the number of criteria to ensure that the applicant is creditworthy enough to grant the loan. Here are some tips to make sure that you are eligible for a personal loan:
1. Build a High Credit Score: The most crucial criteria in personal loan eligibility is the credit score. Lenders use credit score as a measure to assess your creditworthiness and understand how risky it is to grant you the loan. Since there is no collateral involved, the assurance of creditworthiness through credit score becomes the base for further assessment. If you build a good credit score with timely payments of your ongoing loan or credit card dues, then availing a personal loan will be much easier. A score of 720 and above is considered to be good, while the score of 800 and above is considered excellent.
If you want to be eligible for a personal loan at all times, then it is best to build your credit score to reach around 800 and maintain it.
2. Clear Existing Debts: Another important criterion to assess personal loan eligibility is the portion of the applicant’s income, which is available to cover the burden of monthly EMIs. If you have existing loans or credit card dues, then it will be covered under a fixed obligation, which will reduce the portion of income available for the EMIs. Thus, lesser will be the amount of loan for which you will be eligible.
That’s why it is imperative that you pay off the existing debts so that you are eligible for the higher loan amount.
3. Add all your Income: along with your salary income, you should also mention other income sources to increases your ability to repay the borrowed sum. Absence of collateral is bound to make the lender suspicious about everything. Therefore, the best way to ensure that you get the loan is to give as strong assurance as possible about your repayment capacity and intent.
4. Assess Lender’s Eligibility Criteria before Applying: Before deciding on the lender, you should go through and assess the personal loan eligibility criteria of various lenders and understand that which of them has the minimum requirement. The chances of getting the loan will automatically increase with the lender whose eligibility criteria are easy to meet. Some of the easiest eligibility criteria to meet for a personal loan are:
a) The age of the borrower should be between 23-60 years.
b) Total work experience required is 2 years, while minimum experience in the present organization should be at least 6 months.
c) The borrower should be receiving a salary either through cheque or bank transfer.
5. Long Tenure: When you choose longer tenure, it gives a bit of confidence to the lender that you have the capacity to repay the loan over a period of time. Besides, longer tenure also reduces the monthly EMI burden on your pocket, enabling you to manage your budget properly. You can also use a personal loan EMI calculator to assess how much EMI you can afford and the tenure you should select.
6. Avoid Multiple Applications: When you are planning to avail of the personal loan then make sure that you do not end up filling the application form on websites of various banks and financial institutions. Multiple loan applications result in multiple hard queries of your credit report, and each hard query results in a small drop of points. Therefore, collectively it makes a significantly negative impact on their credit score.
Besides multiple application also gives a poor impression of you as a borrower and projects you as credit hungry. Lenders associate credit-hungry applications to be of the highest risk and tend to reject them instantly.
Availing personal loan would be far easier if you would keep the above-mentioned points in mind and act accordingly. Although, when it comes to availing loan aspects like choosing the right lender by comparing interest rates and other applicable charges are also crucial. You can either visit the official website of each lender of taking the help of a loan aggregator to compare the interest rate and other charges like processing fee, pre-payment charges, and foreclosure charges.
A decent monthly income, with over 2 years of work experience and a good credit score, is the best personal loan eligibility combination you can have. However, make sure you opt for a personal loan only when there is a need for it; otherwise, you might end up pilling more debt on yourself than you can repay.
Agam Agrawal is a self-published author of "Your Hope is Your Biggest Enemy - If you cling to it" and has written various articles in the space of self-development and finance. To satisfy his creative buds, he often wanders in the area of short story writing.