As 2020 comes to an end and we step into a new decade, a lot of us might be planning about the future and also how we will finance our future needs and wants. For example, some of us might be planning to buy a new car for our family, and for others, it might be to put our child through school. No matter the purpose, every big decision in life should be made beforehand after considering its pros and cons and especially financial decisions.
But oftentimes, when we are making the big financial decisions of our lives, a common thought which occurs is, how can I finance such a big expense and subsequently, if I want to apply for a loan, how can I increase my chances of getting approved for it.
Thus, in today’s article, we will share with you exactly how you can increase your eligibility for getting a personal loan and thus make it simpler for you to avail the finer pleasures of life.
What Is a Personal Loan?
One of the first and most important aspects we need to understand is the meaning of a personal loan. In simple terms, a personal loan can be understood as a financing instrument through which you can borrow a certain amount of money, usually between ₹10,000 to ₹20,00,000, and use that to finance your expenses. One of the most attractive features of a personal loan lies in the fact that they come with low and competitive interest rates, are unsecured in nature and most importantly, have instant disbursement option available, such that you get the money in your account when you need it the most.
Eligibility Criteria for a Personal Loan
Before we understand how you can increase your eligibility criteria for a personal loan, let us take a quick look at some of the common eligibility requirements followed by lenders across India.
- You have to be a minimum of 23 years of age and a maximum of 58 years of age.
- You should be an Indian citizen and an active resident for the past 5 years.
- You should have a PAN Card, Aadhar Card, valid phone number, and email address.
- You should either be a salaried employee with a minimum monthly in-hand income of ₹13,500.
- Or, you should be a self-employed professional with a minimum monthly in-hand income of ₹20,000.
- You should have a credit score of above 750 on Experian and above 650 on CIBIL.
Please note that the above-mentioned criteria are an amalgamation of the most significant ones across lenders. You are advised to check the official website of the lender before applying for a loan, as these data might vary or be updated.
How to Increase Your Eligibility for a Personal Loan?
Okay, so now we know the common eligibility criteria for getting a personal loan in India. Let us take a look at some of the most common ways through which you can increase your chances of getting approved.
1. Have a Decent Credit Score
The first and most important point you need to remember is that, since personal loans are unsecured in nature, in most cases, lenders will check your credit score with high priority. If you don’t know what a credit score is, it is basically a numerical value that is assigned to you by the credit rating agency based on your past credit history. In India, there are two main credit rating agencies, Experian and CIBIL, and both of these score on a scale of 900.
All credit rating agencies take the following factors into consideration while assigning you a score:
- The total number of loans you have taken in the past
- The total amount of loan you have taken in the past
- The total number of timely payments you have made in the past
- The total number of payments you have missed in the past
Since most personal loans in India are unsecured in nature, the lender will take your credit score into high priority and, based on that, will either approve or reject your application. Generally, it has been observed that if you have a credit score of above 750 on a scale of 900, you can easily get your loan application approved.
2. Maintain a Steady Income
After your credit score, the second factor the lender will check in order to assess your personal loan application is your monthly in-hand income. In this case, if you are a salaried employee of an organization, you need to have a minimum monthly income of ₹13,500, and on the other hand, if you are a self-employed professional, you need to have a minimum monthly income of ₹20,000.
Generally, it has been observed that salaried employees are preferred by lenders over self-employed individuals since having a steady source of income provides a guarantee of acquiring on-time repayment.
Along with this, a common rule of thumb followed by lenders is that the total amount you are liable to pay every month should not exceed 50% of your in-hand monthly income, and thus you can reverse engineer this to find the exact loan amount you will be approved for and apply for the same to get approved quickly.
3. Clear Past Dues
When a lender checks your credit history, one of the most important aspects they take into consideration is the number of loans you have taken in the past. In this regard, as we mentioned earlier, the total EMI you are liable to pay every month should not exceed 50% of your net monthly income, and thus, a great way to increase your chances of getting approved is to clear all your past dues before applying for a new personal loan.
Along with this, if you are planning to apply for a personal loan in the future, strive to maintain an on-time EMI repayment schedule for at least 12 months leading to your application. This will showcase to the lender that you are trustworthy and can be relied upon, thus increasing your chances of getting approved.
Getting a personal loan in 2021 has become easier than ever before, thanks to the many lenders who now specialize in rendering this service. Thus if you are applying for a personal loan, go ahead and follow the tips shared in this article, and you will get approved in no time.