A personal loan is a preferred credit option for the ones with urgent fund needs. Personal loans need minimal paperwork, instant disbursal, have no security needs and have zero restriction on funds end-use. However, the unsecured nature of personal loans needs lenders to carry out caution when assessing personal loan application.
Besides meeting exigency linked expenses, one can even refinance high-interest credit or consolidate their multiple loans with low Personal Loan Interest Rates. One can even fill up the simple form online on the respective lender’s site and avail instant accessibility to cash as per their requirement.
Distinct lenders have distinct terms & conditions, which impact the amount one requires repaying. Thus, before applying for a personal loan, one must research numerous online options to know the best deal.
Here, we will state 4 crucial factors considered by lenders when assessing the applicant’s personal loan eligibility:
This is one of the important filters that lenders consider to assess a personal loan application. The ones with a credit score of 750 and above are thought to be creditworthy and have increased chances of personal loan approval. Few lenders even provide personal loans at preferential rates to the ones with higher scores. As the ones with scores below 750 generally lack credit discipline, lenders might turn down their application for a personal loan or charge higher rates to make up for their higher credit default risk.
As the need for a personal loan is uncertain and can come up anytime, regular checking of credit score right before applying for a personal loan might not be very helpful. Instead, one should develop the habit of timely reviewing their credit report. Following healthy credit practices such as repaying credit card dues and EMIs by their due date, keeping CUR under 30%, timely monitoring the co-signed and guaranteed loans by you, neglecting repetitive credit card or personal loan applications within a short period etc. will assist you at improving or maintaining your credit score. It will give you the required time to undertake corrective measures to ameliorate your credit score.
The periodical review also will assist you to timely recognize the data or clerical errors in your credit reports and timely report them to the credit bureaus and lenders for rectification. A corrected credit report can automatically increase your credit score along with your personal loan eligibility.
EMI repayment capacity
Similar to other credit options, lenders factor in the repayment capacity of personal loan applicants when assessing their personal loan applications. Usually, lenders need the loan applicants’ monthly loan repayment obligation, which involves EMIs for new and existing loans to be under 60% of their GMI/NMI. As longer repayment tenures result in lower EMIs, the ones surpassing this limit of 50% must choose longer repayment tenures to increase their repayment by lowering their monthly EMIs. The ones surpassing this specific limit generally have reduced chances of availing of personal loan approval.
Lenders factor in the employment profile of the personal loan applicants when approving their personal loan applications. Also, few lenders factor it when setting the rates of personal loan applicants. Generally, lenders prefer the salaried employees over non-salaried ones owing to their increased income certainty. Among salaried applicants, those working with reputed top-notch corporates or the public sector employees are most preferred over the rest. Likewise, among non-salaried categories, professionals such as chartered accountants and doctors contain increased chances of availing of personal loan approvals.
Existing consumer relation with NBFC and banks
Many of the lenders provide pre-approved personal loan offers at preferential rates to the existing consumers. Thus, the ones considering taking up personal loans must start their search by directly contacting the NBFCs or banks and with whom they already have an existing lending or banking relation. Such relations can be in the form of savings, current, recurring/fixed deposit or salary accounts or because of the existing credit card or various other credit options. Interest rates provided by such lenders can be utilized as a benchmark for striking personal loan rate comparison provided by other lenders.
Here are some crucial tips to ameliorate your personal loan eligibility
Though various factors play an important role in determining your eligibility for a personal loan, you can enhance your personal loan eligibility by following the listed tips:
* Repay your loan EMIs & credit card bills on time in full by the due date: Being regular with all your financial obligations ameliorates your credit score and enhances your chance of availing of instant loan approvals.
* Lower your existing debts to bring down your outstanding loan burden: One can save a higher portion of monthly income that can be used for servicing the new debt. When lenders know that you have adequate surplus income in hand after meeting your mandatory monthly income, they might approve your loan without thinking twice about the same.
* Keep your CUR below 30% as it will ameliorate your credit score, which would further boost your personal loan eligibility. Your credit score serves as a mark of creditworthiness, which helps lenders know you are financially responsible.
As lender’s risk appetite and their credit risk evaluation procedure can widely differ, your personal loan eligibility along with your rates charged can even differ widely across lenders. Thus, ensure to regularly enquire with numerous lenders about your personal loan eligibility. One of the most prudent ways for doing so is visiting online lending markets, which can fetch you different personal loan offers based on your income, credit score, employer’s profile and others. Also, this would eliminate a negative impact on your score for making personal loan enquiries with numerous lenders. Requests for credit reports performed by the online financial markets when offering you numerous personal loan offers are thought to be soft inquiries, which do not lower your score in any way.
In addition to the factors stated above, it is advantageous to select lenders that take a limited amount of time for processing the personal loan application and offer reliable customer support. For this specific purpose, you can ensure to apply for an instant personal loan that is provided by numerous lenders so that you can benefit from their renowned after-sales services & instant disbursal time.