Applying for a personal loan? Improve your eligibility first
Usually, personal loan eligibility depends on factors such as your age, city of residence, salary and employment, financial standing, and existing debt.Updated: Jun 30, 2020, 16:02 IST
A personal loan is an unsecured loan, which means that you are not expected to pledge any property or collateral as security. You can use a personal loan for most of your financial needs - for the expenses of a medical emergency, your child’s education, to consolidate debt, or even manage the finances of a home renovation project.
You can apply for an online personal loan by visiting your lender’s website and you can get the amount you need with very little paperwork. And while it is true that availing of funding via this credit type has become a lot easier, the eligibility criteria is something you need to be informed about.
What is the eligibility criteria for a personal loan?
The eligibility criteria for an online personal loan refers to the terms that a lender sets to approve your loan application. All borrowers need to qualify for the loan by meeting these terms. Usually, personal loan eligibility depends on factors such as your age, city of residence, salary and employment, financial standing, and existing debt.
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All these factors affect your loan repayment ability and are, thus, used by lenders to assess your financial profile. While the criteria changes from lender to lender, they are usually similar.
To ensure that you don’t face any problems during your application, even as a first-time borrower, here are 4 ways to improve your eligibility for an online personal loan.
1.Build and maintain a high credit score
One of the best ways to improve your eligibility for an online personal loan is to work on your credit score. This score is a basic requirement for most lenders and determines whether or not you qualify for the loan. Most lenders require a CIBIL score of 750 or more to qualify for a personal loan. So, to improve your chances at approval, ensure that you’re above the minimum requirement and can maintain a high credit score. The best way to go about this is to either service long-term debt in a timely fashion, avoid defaulting on your payments or clear off any existing debt you may have to your profile.
2.Include all sources of income in the application
When submitting your documentation proving your eligibility for a personal loan, be sure to submit proof of all sources of income. This includes your salary or earnings from a business as well as all other income generated through real estate, investments or any assets you may own. Showing a healthy stream of income poses you as a low-risk borrower and lenders are less likely to reject your application if you can comfortably handle debt.
3.Apply with a low debt-to-income ratio
Tying in with your income is your debt-to-income ratio. This is the percentage of your monthly income that is used to service any existing debt. Ideally, when looking to improve your eligibility for an online personal loan, you should aim to keep your debt-to-income ratio below 40%. This way, you can comfortably accommodate additional debt without risking default. Lenders are also less likely to approve applications with a high debt-to-income ratio.
4.Avoid applying for loans or credit in quick succession
Every time you apply for any form of credit, lenders make a hard inquiry into your credit report. These reflect on your credit history and reduce your score by a minimal amount. While 1 or 2 applications may not have a severe impact on your score, any more made in quick succession will leave a noticeable mark and make you come across as credit hungry. This is a point of concern for lenders and reduces your eligibility for a personal loan.
Adhering to these tips before you apply for an online personal loan is sure to help you get the funding you need in a hassle-free manner. To further simplify the experience, lenders like Bajaj Finserv give you access to a free personal loan eligibility calculator that shows you exactly how much you are eligible for. This is an easy-to-use, intuitive tool that requires minimal effort and gives you precise results every time.
With a Bajaj Finserv Personal Loan, you can get a sanction of up to Rs.25 lakh at a competitive interest rate and repay it over a flexible tenor of up to 60 months. Further, when you apply for this online personal loan, you enjoy instant approval within 5 minutes and can have the entire sanction disbursed within the same day.
Bajaj Finserv also offers Flexi Personal Loans through which you can borrow from your sanction as many times as required, without needing any additional applications. Here, you only pay interest on the amount you withdraw and reduce your monthly outgo by up to 45%*. So, if you need instant funding and with relaxed eligibility terms, consider this online personal loan.
Disclaimer: This content is distributed by Bajaj Finserv. No HT journalist is involved in creation of this content.