Today, personal loans are one of the most convenient and preferred financing options. In the past decade, the use of personal loans has seen a humongous rise. Earlier, seen as a high-cost financial instrument only to be availed in dire emergencies, personal loans, today, have emerged as the smart choice of finance management. Be it buying a fridge or a mobile, renovating your home or taking care of healthcare, a personal loan is the first choice. This is mostly because of the easy access and high affordability of personal loans. With a personal loan app, you can easily apply for an instant loan in a few simple clicks.
In addition to that, a cash loan also comes with many value-added features like calculating tools, convenient repayments, balance transfer, and much more. With smart finance choices you can save big even when you avail a personal loan.
However, before applying for a quick cash loan there are a few things you must know. One of them is the personal loan eligibility factors. Since, personal loans are unsecured loans which means the lender do not ask for guarantee against your personal loan, they check your repayment capability through your eligibility parameters. You must compare the eligibility criteria of different lenders and apply for the loan with the one who has simplest eligibility rules. This not only increases the chances of your loan approval but can also bring you attractive offers.
Here are some useful tips that can help improve your eligibility for the loan. These tips should work even for individuals who do not qualify for the loan initially but are ready to work on their profile for better chances of borrowing.
9 Quick Tips to Help Improve Your Personal Loan Eligibility
- Work on your credit score improvement
The credit score of an individual bears critical importance when availing a personal loan. It helps lenders assess the borrower’s creditworthiness. When you apply for a loan through a personal loan app, the lender sends a hard enquiry for your credit score.
It is thus recommended that you check your credit score before applying for a cash loan. In case, your credit score is not that great, then you must work on improving your score. There are many ways to improve your credit score. Check your detailed credit report and check for any discrepancy, try closing some of your existing loan, or pay off your credit card debt, consolidate your loans if you have multiple loans.
- Apply with a co-borrower having a high income
You can always increase your personal loan eligibility by adding a co-borrower who holds a high income and good credit score. This may best serve as a way to go forward when your income does not meet the minimum threshold or you do not qualify for a higher loan amount. Since, having a co-applicant diversifies the risk associated with your account; the lender would be more open to offer you a higher loan amount or lower interest rate.
- Bring down your debt-to-income ratio
Your debt-to-income ratio determines the percentage weightage your fixed monthly obligations carry on your monthly income. Lenders check your debt-to-income ratio to verify your loan eligibility and to determine the loan amount. It also impacts the interest rate at which the lender would offer you the loan. Before applying for the loan, check your debt-to-income ratio. Make sure to mention all your income sources if you have any additional income other than your salary. Also, if the ratio is still high, try to close some of your existing debts or look for a co-applicant.
- Choose a long tenure for repayment
A long tenure makes your loan EMI more accommodative in your monthly income. This also improves your overall eligibility for the cash loan. However, please note that long loan tenure would also mean high interest pay out which would make your total loan very costly. Always try to balance your loan tenure and your loan amount in a way that would make your EMI affordable but won’t make your loan costly. You can use an online loan calculator that’s available on the personal loan app to make the calculations.
- Document all alternative income sources
If you have more income sources than one, you can always document them when applying for a cash loan to enhance your financing capacity. Whether you are applying through your lender website, through a personal loan app, it always helps to add all income sources. Make sure you have all the necessary documents to prove your additional income.
- Avoid making multiple loan applications
Often, in the rush of borrowing, people end up applying for the loan with multiple lenders. But this is a bad idea. It makes you seem credit-hungry and is not taken in good light by lenders. Applying with multiple lenders at once will also impact your credit score. Therefore, it is better to compare the loan offers from different lenders and apply with the one that best suits your requirements.
- Leverage your employer reputation and employment stability
If you are working with a reputed employer whether in public sector or private sector, you can leverage your employment tag. People working in government sector or in MNCs are often offered personal loans at much better terms. So, make sure to mention your employer’s name while negotiating for your loan. This is because of the stability that comes with a reputed employer. It reduces your lender’s overall risk and they are more inclined to offer you a personal loan at great terms. Also, check with the financial institution where you have your salary account, they might offer you some great deals on a new loan.
- Keep your credit utilisation ratio
Before applying for a cash loan, check your credit utilisation ratio. This is a percentage of the total credit utilised out of the total credit available. Your credit utilization should not exceed 30% of your total credit card limit. This indicates low credit dependency, thus improving your borrowing profile. This is one of the reasons why you should always go for a credit card that offers you high credit limit.
- Apply for a loan amount lower than your maximum eligibility
At last, you must also attempt to apply for a loan amount lower than your maximum financing capacity as per your income stability. It helps bring down your total loan liability and presents the borrowing as a more affordable avenue.
Conclusion
With these tips in place, you can always amplify your overall eligibility for a personal loan and seek easy lender approval. Applying for the advance through a personal loan app is always a good idea. It is not just simple and easy but it also offers you some great features on your personal loan.