5 Simple Tips to Enhance Your Personal Loan Eligibility

Personal loans are one of the most versatile types of loans. While there are different loans such as car loan, home loan, or education loan, each of these can be only used for specific purposes. A personal loan, on the other hand, can be used for meeting any financial expense, which makes it preferable for many borrowers.The most attractive feature of a personal loan is that it is an unsecured loan- one that doesn't need security through collateral. The only criteria being the candidate's records, which includes their monthly income, credit score, loan repayment capacity, etc. Thus, while they offer flexibility and convenience to the borrower, approving or rejecting a loan application is based on some factors. Let us look at five essential tips to increase your personal loan eligibility .

1. Improve Your Credit Score: It is a three-digit score between 300 and 900 that defines your credibility to the lender. It is based on how you have handled loan repayments in the past. A score of 750+ is considered as good by most lenders. If your score is less than 700, you can work towards improving it. While it may take some time, it will undoubtedly impact your chances of getting a loan.
2. Clear your Debts: Most lenders look at your debt-to-income ratio before granting you a loan. It is the ratio of your monthly EMIs to your income. If it is more than 40%, your loan application may be rejected by the lender. It is vital to reduce your debts to lower the debt-to-income ratio to boost your loan eligibility.
3. Increase Your Income: Lenders look at your income level before granting you the loan. If it is low, banks may not be willing to loan you the desired amount. Especially since personal loans are unsecured loans, your income is the only way banks can recover the loaned amount. To increase your income, do consider adding your income from other sources such as rent from property, sale of assets, etc.
4. Increase the Tenure of Your Loan: One way to boost the eligibility of loan is to increase the tenure of the loan. This could reduce the EMI component increasing your chances to get a loan. However, do note, an increase in tenure also means an increase in the interest burden to the borrower.
5. Taking Advantage of Your Relationship with the Lender: If you have already had a savings account, investment account or a loan account with the lender, it may increase your chances of getting a loan. Thus, while applying, do bring out this to the lender's attention.

Increase Your Chances of Getting a Personal Loan While there may be other factors the bank considers before providing you with a personal loan, such as your age and employment type, the factors mentioned above are in your control to an extent. Hence, take action and increase your chances of attaining a personal loan.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.