Personal Loan application is one of the important factors while applying for a Personal Loan. Before your loan approval, lenders check your Personal Loan application as part of the loan process. Personal Loan application includes all the required documents, loan application form, and other supporting documents. Today, you can apply for a Personal Loan online where the entire process is online via the lender’s official website or official app.
Due to the rise in financial obligations, there has been a huge increase in Personal Loan applicants. A Personal Loan is a type of unsecured loan that can be used for meeting any financial obligations such as funding higher education, wedding, travel, home renovation, etc. There are various factors that influence your Personal Loan application including income, age, credit score, employment, etc. Here are a few tips to improve your Personal Loan application.
You must meet the required eligibility criteria to avail of a Personal Loan. These eligibility criteria might differ from lender to lender. Here are a few of the following eligibility criteria that you must meet – you must be between the age of 24 and 58 years, you should be in current employment for a minimum of 6 months, and you should have a minimum of 24 months of total work experience with more than ₹40,000 monthly income. Also, you should have a credit score of more than 750.
- Loan amount
The loan amount is the amount availed by a lender to a borrower for a certain period of time. There are different types of borrowers with different loan requirements. A borrower might have a high loan requirement which requires a higher credit score and must meet all the eligibility criteria. A higher credit score equals higher creditworthiness. A borrower with a higher credit score has a good chance of availing higher loan amount at a lower interest rate. Also, you should avoid taking multiple loans at the same time.
- Choose the right lender
Choosing the right lender is the first and foremost step. There are various factors that influence choosing the right lender such as your desired rate of interest, loan amount, loan tenure, additional benefits, processing fees, etc. If you already have an account with a lender, you must apply with the existing lender. Applying for a Personal Loan with the existing lender will help you in getting quick approval and disbursal.
- Check Your Credit Score
A credit score is a three-digit number used for checking the creditworthiness of a borrower. There are various credit bureaus – CRIF Highmark Experian, Equifax, TransUnion CIBIL who are responsible for providing credit reports, credit scores, and credit history of individuals. When a lender checks your credit history, it is considered a hard inquiry. Every time a borrower applies for a loan, the lender asks for a credit report which is registered as a hard inquiry. Each registered hard inquiry negatively impacts your credit score. Hence, it is advised to avoid applying for multiple loans at the same time. However, a borrower can check his/her credit score at any time. When a borrower checks his/her credit score, it is considered a soft inquiry. A soft inquiry doesn’t impact your credit score. A credit score of 750 and more is categorized as good, and a borrower has a higher chance of availing of loan approval. A borrower who has a lower credit score has a lower chance of getting loan approval.
- Debt-to-income ratio
The debt-to-income ratio helps to understand the percentage of income an individual uses for paying monthly debts. A higher debt-to-income ratio indicates a borrower has stable income to pay debts. Whereas a low debt-to-income ratio means a borrower has enough income to pay all the debts. A lender considered a low debt-to-income ratio as a low-risk borrower and has the ability to repay the loan. A borrower with a higher debt-to-income ratio is considered a high-risk borrower and the lender offers a higher interest rate.
While filling out the Personal Loan application, you must carefully read all the terms and conditions. This will help you avoid any misunderstandings and errors. It is important to check factors such as loan tenure, rate of interest, loan amount, additional charges, processing fees, etc before signing the loan application form.