4 Ways to Improve Your Chances of Getting a Personal Loan
Posted on Tuesday, November 21st, 2017 | By IndusInd Bank
A personal loan is an unsecured loan taken by a person to meet urgent financial requirements. It is a popular financial solution wherein you need to meet a one-time and urgent expense that might be out of your current budget or to overcome a temporary shortfall in funds.
Personal loans are a convenient way to raise immediate funds as they do not require you to make a security deposit against it. The application process is quick and simple, and you could use the money for any purpose however, you are required to state the reason for applying for it.
Although the application process is easy and funds are approved quickly, the approval depends on a few important factors. Being an unsecured loan, lenders would consider factors like your credit history and income carefully before sanctioning the funds. If you are not careful and do not satisfy certain conditions, there is a chance of your loan application being rejected. Taking a few simple measures could exponentially increase the chances of having your loan approved. These include:
Checking Credit Score
Obtaining your credit report is the first thing you should do while planning to apply for a personal loan. Your eligibility for a loan, the amount of loan that may be sanctioned to you, the interest rate, and the approval of your loan are largely dependent on the score given to you based on your credit history. A good credit score strengthens the chances of approval. Ensuring a good credit score may give you an opportunity to improve your score before applying and even give you a rough idea of the amount of loan you are eligible to receive.
Avoiding Making Multiple Loan Applications
Contrary to popular belief, applying to numerous institutions and money lenders does not increase your chances of getting an approval on one of those applications. In fact, it sends a message of desperation to potential lenders who may perceive you as hungry for credit and in need to fund your expenses from multiple sources. Furthermore, when applications are not met with approvals, your credit score is hampered, which reduces your chances of getting loans in the future. It is advisable to choose your best option and apply accordingly.
Limiting EMIs to 30% of Your Income
If you have existing loan obligations at the time of applying for a personal loan, it is imperative that you ensure that the total EMIs you are paying towards all those loans cumulatively does not exceed 30% of your monthly income. A lender would scrutinize your application based on the ability to take a new loan from what is left of your total income after you have met your existing loan obligations. Although a lender tends to be wary of forwarding credit to those who are already repaying loans, organizing your finances to limit these monthly EMIs to less than 30% of your income would give you a good chance of getting the personal loan amount you desire.
Carefully Considering the Loan Amount
You must assess your requirements carefully and accordingly apply for a loan amount. Applications for high loan amounts could lead to rejection. Moreover, applying for an amount which exceeds your eligibility in terms of creditworthiness could also result in rejection. It is always prudent to have an idea about the loan amount that you are eligible to take, based on your total income and financial obligations towards other creditors. Following this, you should consider the amount of funds that you actually need before applying to seek a certain amount of money. If only a small sum of money is sufficient to give you the necessary push, you must not get carried away and ask for a larger amount. You must differentiate between what is an essential requirement and those which could be avoided. Having determined that, you must also analyse your resources to know how you intend to repay the amount and then apply for that sum as your loan amount.