No restriction on the usage of funds, fast disbursal, minimal documentation and zero collateral or security requirements make personal loans one of the ideal credit options in times of urgent fund requirement. However, such ease in borrowing often makes you overlook a few of the important aspects of a personal loan. To ensure your application does not get turned down due to any personal loan eligibility mismatch, beware of these 5 parameters –
- Review your credit score
A credit score is an important factor considered by lenders when assessing your application for a personal loan. As a good credit score of 750 and above can enhance your personal loan eligibility chances, consider instilling healthy credit habits like regular repayment of your credit card dues and loan EMIs, containing a CUR (credit utilization ratio) of within 30 per cent, monitoring your co-signed loan accounts etc.
Also, as your credit score is calculated based on the information in your credit report, it is necessary to periodically review your report to detect errors or discrepancies. In case of any errors, report them instantly to the concerned bureau to enhance your score and your personal loan eligibility prospects.
- Compare amongst different loan offers
With most lenders offering different loan offers at varying personal loan interest rates ranging anywhere between 10.99 and 24 per cent, it is necessary to select the right lender as per your requirement. Consider approaching online lending marketplaces to get the best deal according to your personal loan eligibility criteria and requirement. While you apply for a personal loan, ensure not to restrict your comparison to only personal loan rate, factor in other parameters also like prepayment fees, processing charges and other important terms before choosing a specific lender.
In case you need the funds urgently, apply for a pre-approved personal loan. Unlike regular personal loans that are processed within 2-7 days, pre-approved loan is an instant personal loan available to you immediately based on your credit profile.
- Select loan tenure as per your repayment capacity
For assessing your application for a personal loan, lenders evaluate your repayment potential by calculating your fixed obligation to income ratio (FOIR). FOIR is the proportion of your income that is consumed in the form of debt repayments like loan EMIs and credit card bills. Lenders usually prefer lending if you have an FOIR of up to 40 – 50 per cent.
If your repayment potential is low, you must consider choosing a higher repayment tenure. However, note that a higher repayment tenure would mean a higher overall interest constituent. To lower your interest component, you may consider prepaying your loan with surplus funds in the future.
- Avoid submitting multiple loan applications
When you apply for any credit option, may it be a credit card or loan, lenders tend to fetch your credit report from the concerned credit bureau to assess your credibility and repayment history. Such lender-initiated fetches are called hard enquiries by the bureau, which pulls your credit score down every time they request a fetch. Placing a request for multiple such credit report fetches in a short time span can show you as a credit-hungry person, resulting in an enhanced fall in your credit score. Such a drastic fall in score also negatively impacts your chances of securing a personal loan.
Instead of directly applying with multiple loan lenders, consider approaching financial lending markets to compare and select the most suitable loan offer. Once you have selected the preferred loan deal, you may move ahead to click on the online loan apply button for instant processing.
Before you apply for a personal loan, ensure to go through the above requirements to enhance your loan eligibility chances. Moreover, as a personal loan seeker, you must also use the above factors to negotiate the best loan terms and conditions with the lender. For example, you can ask for a reasonable personal loan interest rate if your credit score or monthly income is high.
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