Five Ways to Boost Approval for Your Personal Loan

Today, a Personal Loan has become has become one of the best ways to get funds for sudden cash expenses or to meet a cash shortfall during the month. They are an unsecured type of loan, which can be used for various purposes, like planning a holiday/trip, taking care of repairs/renovation of any kind, paying off multiple bills, to financing events like a birthday/wedding celebration. Banks and financial institutions that provide Personal Loans also don’t monitor how they are being used. Therefore, a Personal Loan also offers a lot of flexibility to its customers. Most Personal Loans can also be availed online, which leads to faster disbursal of funds.

However, banks and lending institutions take care to check the creditworthiness and financial standing of every customer they lend to. Since Personal Loans do not have any security or collateral, there is no way that the lending banks can cover their losses in case of a default. Here are a few ways you can boost your chances of getting your Personal Loan approved, the next time you apply for one:

  • Maintain a good Credit Score: Your Credit Score is a three-digit number that reflects your creditworthiness and ability to repay debt. In India, 4 credit bureaus generate credit scores — CIBIL, Experian, Equifax, and CRIF High Mark. The credit scores issued by all the 4 bureaus are equally crucial as various banks may use different bureau scores to make assessments on a customer’s loan eligibility. Timely repayment of your debt and EMIs, not making too many requests for new loans are a few ways of improving your credit score.

Check Your Loan Eligibility

  • Ask for a reasonable amount: If you are already paying off existing loans, banks will automatically be wary of sanctioning you a new Personal Loan, because they’ll be worried about your repayment capacity. That’s why it’s always best to ask for a loan amount that you know you’ll be able to pay off. Just see if you’ll be able to allow a specific portion of your net monthly income towards the new loan while keeping a buffer for the existing ones. You can also check out your Personal Loan eligibility using various online calculators available online.
  • Compare various options: Rather than just checking which bank or lender offers you the best interest rate for your Personal Loan, it will be a better idea for you to check other factors. This includes terms and conditions, pre-payment/foreclosure charges (if any), repayment options, and repayment tenure across various loan offers from different banks before you settle on the final offer.
  • Submit all required documentation: This point is self-explanatory. You need to ensure that you submit all the documentation without leaving any chance for error. Personal loans require very little paperwork anyway, so there’s little chance of you going wrong. Just make sure you’re aware of whatever is necessary, and take care to cross-check whether you have all of it at the time of your application. Getting your loan application delayed (even for a tiny bit) is agonizingly frustrating if it happens because of incomplete documentation!
  • Avoid multiple loan applications: This is because every time you apply for a loan, the lending organization generates a request for your latest credit report. This request is called a ‘credit inquiry.’ So, you can imagine the number of credit inquiries that may show up on your credit report if you make too many loan applications. As and when that happens, you come off as a very desperate borrower. This can lead to a lower credit score while also effectively killing your chances for a new loan.

So, now that you have these tips on how to be an effective borrower make sure you put them to good use on your next Personal Loan application.

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