You might occasionally have a significant or unforeseen one-time expense that you could cover with your money, such as a child’s wedding, a home improvement, or even a trip. In these circumstances, it is advised to apply for personal loans to make up for this momentary cash shortage.
By using the following advice, you can increase your chances of getting your personal loan approved:
Before you apply for a personal loan, check your credit score:
You run the danger of having your loan application denied if you apply for credit without knowing your credit score. Getting your credit report is the first thing you should do if you intend to apply for a loan so that you do not receive a nasty surprise when you do so. Even though you may be paying all of your bills on time and believe that you have a good credit score, there are other things that could be hurting it, such as a high credit utilization ratio, being the guarantor of a loan that has been defaulted on, fraud, or inaccurate reporting on your credit report. To be informed about your credit condition and to address any errors to prevent being rejected, get a copy of your credit report.
Make sure your credit score is 750 or higher:
You have the highest chance of getting your personal loan approved if your score falls within this range. For a personal loan in India, your credit score is extremely crucial because there is no collateral that the lender may use to protect their investment in the event of default. Typically, lenders use a credit score of 750 to determine whether a borrower is qualified. If your score is below 750, pinpoint your credit profile’s weak points and make an effort to raise them. Each time you are turned down due to a low credit score, your credit score will fall even further, making it harder and harder to repair your credit health.
Do not submit multiple loan applications:
It is tempting to submit many applications to banks or lenders at the same time in an effort to increase the likelihood that at least one of them will approve your loan. This gives prospective lenders the impression that you are “hungry” for credit and need to apply to multiple different sources in order to pay your bills. Additionally, submitting an excessive number of loan applications without receiving any approvals may lower your credit score. Don’t submit an application anywhere else unless it has the best possibility of being accepted.
In the last six months, you should not have taken out a personal loan:
Lenders may have doubts about your capacity to take on a load of a new debt obligation and make additional repayments if they learn that you previously took out a similar loan. The time between each loan application should be at least six months. You would be better off waiting until after a non-urgent cause, such as a vacation or home improvements, to reapply.
A mix of secured and unsecured loans is preferred:
A secured loan is one where the borrower gives the lender security, such as the asset being purchased (in the case of a home loan, the property), the vehicle being driven (in the case of an auto loan), or the gold being pledged (in the case of a gold loan). In contrast, the lender of a personal loan lacks security with which to safeguard his investment. When you have a combination of secured and unsecured loans that are being returned on time, potential lenders are comforted and your credit score rises.
Make sure that no more than 30% of your income is used to pay EMIs. Lenders want to know if you have adequate income after paying off your current debt to take on a new loan. Make sure that no other loan’s EMIs total more than 30% of your monthly income. Your home loan EMI is not included in this. Therefore, if your monthly salary is Rs. 60,000, the sum of all your EMI payments that aren’t for a home loan shouldn’t be more than Rs. 20,000.
Before applying, make sure you have worked for the same organization or employment for at least six months. In order for you to be able to make all of your loan repayments on schedule, banks prefer to see solid work and a consistent stream of income. Your income is crucial when applying for a personal loan because banks lack any kind of collateral in the event that you stop making payments. There is a good probability your application will be turned down if you have been moving employment regularly.