A Personal Loan caters to all sorts of needs, from medical emergencies and vacations to down payments on homes or vehicles, or even things like buying new furniture or gadgets. Due to their flexibility, Personal Loans are one of the most preferred loans in the financial domain today.
Before applying for loans, borrowers must check their Personal Loan eligibility criteria with their preferred financial institution and keep their documents in order to prevent last minute hassles and consequential rejection of the application. Invariably, people don’t avail Personal Loans after much planning, which makes it critical that your loan application gets approved as soon as possible, when you need credit for a pressing reason. All you need to do is ensure you meet the specific criteria that needs to be fulfilled for a quick approval.
Here is what you need to ensure before you apply for a Personal Loan online.
1. Check your credit score
Credit scores have become synonymous with the loan approval process nowadays. One of the first things most lending institutions will do before considering your loan application is check your credit score. If you want to give yourself the best chance of having a loan application approved, try and maintain a credit score of 750 or above. If you’re looking to apply for any financial aid–Personal Loans included–take some time beforehand to check your credit score and obtain a copy of your latest credit report.
Personal Loans do not require security, so lending institutions rely on your income statement, salary slips, and credit score to decide whether or not to approve your loan. Your credit score and credit report are considered when applying for a Personal Loan. If your score is low, there’s a chance your application will be rejected since it suggests you have not been responsible for credit in the past. Make sure to improve your score if needed before applying for a Personal Loan.
2. Insufficient Income
One of the main reasons Personal Loan applications get rejected is insufficient income. Your loan application may get rejected if your monthly salary is less than ₹20,000. The best way to overcome this issue is by providing any other sources of income you may have to prove to the loan provider that you can repay the loan.
Salaried professionals must include their latest salary slips in their Personal Loan documents.
3. Too Much Debt
Lending institutions view this as a high-risk situation because it means the applicant might have difficulty making loan repayments on time. If you’re currently in a lot of debt, work on paying it off before applying for a Personal Loan. This will enhance your chances of getting a loan approved and may even get you a lower interest rate.
4. Job Instability
Lending institutions also tend to be wary of applicants with unstable jobs, which can be the biggest hindrance in your Personal Loan eligibility process. If you’ve recently switched jobs or are in danger of losing your current job, it’s best to wait until you’re in a more stable situation before applying for a Personal Loan. Otherwise, there’s a good chance your application will be rejected.
Ideally, applicants must have at least one year of work experience and at least two months of stable employment at their present workplace.
5. No Credit History
Believe it or not, having no credit history can work against you when applying for a Personal Loan. This is because lending institutions have no other way of gauging your creditworthiness since there’s no record of how you have handled credit in the past. If you don’t have a credit history, consider building one by taking out a small loan and repaying it on time. You can also use a credit card responsibly to help make your credit score.
6. Too Many Loan Applications
If you’ve applied for multiple loans in a short period, this will negatively affect your credit score. It is best to wait six months between loan applications to give your score time to recover. Otherwise, there’s a chance your loan application will be rejected.
7. Not Meeting Minimum Eligibility Requirements
Make sure to meet the eligibility requirements for a Personal Loan before applying. Each lending institution has different requirements, including age, income, employment history, and credit score. If you don’t meet the minimum requirements, applying is no point, as your application will likely be rejected. So, make sure you check the Personal Loan documents required with your loan provider and have them ready.
Personal Loans are a great way to finance big-ticket purchases or consolidate debt. However, getting approved for a Personal Loan is not always easy. By fulfilling the Personal Loan eligibility criteria, you can confidently apply for a Personal Loan and get quick approval and disbursal.