Whether health issues, accidents, or unplanned repairs come out of nowhere, emergencies can be daunting and unavoidable. If you don’t plan accordingly, an emergency can quickly deplete your finances, leaving a dent in your savings. A personal loan can be an excellent and convenient solution in such a situation, thanks to its instant approval nature and faster funds disbursement.
Personal loans are a great solution when an emergency strikes and can be used to finance other personal needs. Due to their faster approval, these financing options have become increasingly popular among borrowers, and the good thing is that it’s very easy to obtain a personal loan.
As a borrower, you must meet the lender’s prerequisites before submitting your application. You cannot get the loan if any criteria aren’t met. Of course, you wouldn’t like this, especially if you urgently need cash.
In this article, you’ll get to learn the secrets to get approved for a personal loan easily. Let’s dive into it.
- Build and Maintain a High Credit Score
When lenders review your loan application, they usually make the decision based on your credit score. This number provides a clear picture of how you have handled debt and other financial obligations in the past. A score of 750+ shows you’re a responsible borrower who paid their past debts on time. This will, in turn, lower the lender’s risk, which increases the chances of being approved.
A credit score below 750 shows your repayment record isn’t up to mark. This makes the lender see you as a high-risk borrower, which can then lead to a high-interest rate or rejection of your application.
If you are a self-employed individual, ensure you have a good credit score before applying personal loan for self-employed. You don’t want your lender to reject your application because you couldn’t meet their credit score expectations. Work on building the score and ensure you maintain it.
- Get a Longer Loan Tenure
Lenders usually extend tenures for personal loans up to five years for repayment, which means more manageable monthly EMIs. Choosing a longer loan repayment period can be advantageous since you will solve your financial problems easily because you’ll repay the loan in small amounts and at your own pace. Additionally, the interest rate applied on long-term personal loans is usually lower with a longer repayment duration. This enables borrowers to save money on monthly EMIs and overall interest payments.
- Pay Credit Card Debts and Existing Loans
To increase your chances of being approved for a personal loan or increase the loan offered, you should reduce your debt-to-income ratio by paying off some existing debts. If you already have several debts, adding a loan to your already filled-up dates won’t be a good idea because the lender will see you as a risky borrower, thus, hesitate to grant you a loan. If you are paying several loans, their Equated Monthly Installments (EMIs) should not exceed 50% of your total income.
- Boost Your Income
Before giving out a loan, a lender must be certain that you can repay the loan and by what means. If you have a high income, there are high chances of getting approved for a personal loan, whereas a low income reduces the chances. Therefore, if you have a low income, work on improving it.
To raise your income, show the lender other sources of income, such as incentives for better performance, variable pay, and bonuses. You can show revenue from passive investments or other investment avenues as well. When taken into consideration, these variables can dramatically improve your chances of obtaining a personal loan. Showing the lender that you have various income sources besides your primary monthly salary will assure them of your ability to repay the loan.
With a personal loan for salaried individuals, you can meet the cost of any emergency, education, or renovations. Such loans help salaried employees to tackle extra bills that may crop up.
- Avoid Applying for Multiple Loans
Usually, lenders assess the borrower’s credit report when you apply for a loan. If you’ve applied for a loan from many lenders, they must assess your credit report. This leads to multiple hard inquiries on your report, which makes you a high-risk applicant who seeks abundant credits.
Applying for multiple personal loans may be tempting, but being rejected by several lenders can affect your credit score negatively. To avoid this pitfall and get the loan you need, apply for the loan from a lender with whom you’ve already established a banking relationship.
- Apply for the Loan from a Lender with Simple Eligibility Criteria
You should also apply for a personal loan from a lender that doesn’t have strict requirements. To get personal in Delhi, you should meet these eligibility requirements:
- You should be an Indian citizen and living in India.
- Be 21 years and above.
- You must be employed and earn a monthly salary of Rs. 20,000.
We have outlined ways to help you as a borrower increase your chances of getting approved for a personal loan. When put into practice, you can get a personal loan from any lender without a hitch.