Personal Loan Approval During the Pandemic - Not Impossible

You can face the urgent need for cash at any time regardless of how much planning you do or how prudently you manage your money. The sudden need for cash can arise for a medical emergency, home renovation, a child’s higher education, a kid's marriage, etc.A personal loan can always help you arrange the necessary fund, whatever the need may be. People prefer personal loans because they are unsecured loans which means the borrower isn't required to deposit any securities against such loans.But the personal loan approval process has become more stringent during the pandemic, and the lenders are usually more careful now while sanctioning such loans. Therefore, you need to be more cautious than ever while applying for a personal loan.Your personal loan approval chances can significantly improve if you take care of certain factors.

• Pay your existing EMIs, credit card bills, and other dues on time.
• Keep your credit utilisation low which means refrain from using your credit card to its maximum capacity. Ideally, you should keep the credit utilisation below fifty per cent of the total credit allowed.

• Build a Strong Credit Score A good credit score is often among the first line of filters that lenders deploy to assess borrowers' creditworthiness. Additionally, lenders can consider the credit score for deciding the interest rates to be offered to the borrower.Therefore, you need to build and maintain a robust CIBIL score, preferably 750 or more. Improving your credit score is not that difficult. You just need to have the financial discipline and perform the following tasks regularly.
• Avoid Multiple Applications If you fill out multiple loan applications, then you may come across as a borrower desperate for a loan with a below-par financial status. It can also pull your credit score down, making it harder for you to get a loan in future.Instead, apply limitedly after doing proper research. You can check the lender's eligibility criteria and compare your credentials before applying to ensure that you tick all the checkboxes.Ensure that there’s a minimum six-month gap between two loan applications if you decide to apply more than once.
• Choose a Longer Loan Tenure Longer loan tenure can bring down your EMI amount, making it easier to manage your finances accordingly. You can use the personal loan EMI calculator provided on the lender’s official website to choose the loan tenure for a loan amount and see the amount of EMI you would be paying for that tenure.But you should also remember that longer loan tenure attracts higher interest charges. Therefore, when choosing a long term, always try to make a part prepayment or foreclose the loan whenever you have spare funds.
• Keep Your FOIR Within 40-50% Fixed Obligation to Income Ratio (FOIR) is also known as the Debt to Income Ratio . It is the ratio of your monthly debt obligations like EMIs, insurance premiums, SIPs, etc., to your total monthly income. Lenders like to sanction loans to people with FOIR within the range of 40-50%.Therefore, try to keep your FOIR as low as possible.
• Your Employment Record Steady employment with a reputed employer indicates strong financial stability. If you have switched too many jobs within a short span, then the lender might be hesitant to sanction your loan.You can improve your chances of getting the desired personal loan by furnishing records that suggest a steady job with a good salary. You can show income proofs such as payslips to gain the lender's confidence.
• Consider a Joint Loan Sometimes people can find it hard to meet all the eligibility criteria set by the lender. You might have a low credit score or a low salary that might disqualify you for a personal loan. In such a scenario, you can consider applying for a joint loan with a co-applicant who would be equally responsible for paying off the EMIs.But ensure that your co-applicant’s credit profile can help meet your shortcomings. For instance, a better credit score, salary, or repayment capacity of your co-applicant can rightly compensate for your low creditworthiness in the eyes of the lender.

In a nutshell, personal loan approval should not be an arduous task in the post-pandemic era, provided that you do your homework well before applying for a personal loan. Approach the right lender with the right confidence, and you can be on your way to getting the desired loan amount sanctioned.

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.