Before you go and apply for a loan, you need to know about your personal loan eligibility. Every lender has a set of criteria that a borrower must meet in order to qualify for a loan.
In this article, we’ll explain the steps you can take to boost your personal loan eligibility, which will increase your chances of getting a loan approved.
1. Check the eligibility criteria
Most people overlook this important step but it is one of the most basic and important tips to keep in mind before you send off your loan application. You want to ensure that you meet the eligibility criteria of the lender, or your application will be immediately rejected.
You can visit the lender’s app or website to find out more information on what their personal loan eligibility is, and whether or not you meet them. The basic criteria include age, income, location and employment type, so only apply to lenders where you meet all of these parameters.
2. Maintain a good credit score & history
A credit score is one of the most important personal loan eligibility parameters that a lender will check when they go through a loan application form. Good credit or CIBIL score is determined by how much credit a borrower has availed, and their repayment habits.
If you repay your loan EMIs on time, your CIBIL score increases; conversely, making late payments and defaulting on loan repayment will only decrease your score. Your CIBIL score is an indicator of your creditworthiness, so ensure that you only borrow what you can afford and pay your EMIs on time.
3. Keep your debts low
If you have many existing debts and decide to apply for a fresh loan, the new lender is likely to reject your application. This is simply because they view you as being already saddled with enough debt and believe that you are not likely to have the financial repayment capacity for a new loan. Having a lot of debts definitely reduces your personal loan eligibility in the eyes of a lender!
Sometimes, lenders may make an exception to this case if you have a high income as well as a fantastic credit score and credit history. The other exception maybe if you are looking to apply for a debt consolidation loan, in which you consolidate your entire outstanding debt into one single loan.
4. Salary and bank balance
Don’t have a lot of debts, but still spend a lot and frequently have a low bank balance? This is something that can make you come across as an irresponsible spender and decrease your personal loan eligibility, as lenders will check your bank statements to verify your finances.
If you apply for an amount that is far beyond your financial capacity, a lender may not believe that you can afford the amount. Therefore, carefully review and consider whether you are able to afford the loan amount you are applying for.
5. Submit correct and original documents
Personal loan eligibility is also determined on the basis of having the required documents. All lenders will need a set of KYC documents that verify the identity and other personal details of the borrower.
Banks generally have a long list of KYC documents that borrowers need to provide, whereas online lenders will only need a few main KYC documents to apply for a loan. If you don’t have these basic required documents and submit incorrect or false ones, your loan will be immediately rejected.
6. Carefully fill the application
A properly filled application form with all the relevant details and documents makes it easy for the lender to review your form, which allows them to provide quick approval or rejection.
Since your loan application form is one place where many errors can be made, it’s important to ensure you avoid silly mistakes by reading through the application form twice before filling it out. Even something as a signature mismatch or attaching the relevant documents in the wrong place can lead to your application getting rejected immediately.
If there’s anything in the application form that you don’t understand, take note of it and ask the lender for clarification.
7. Only apply to a few lenders at a time
One of the ways to maintain your personal loan eligibility is to apply only to a few lenders at a given time. This might sound counter intuitive since the common perception is that applying to more lenders means increases your chances of at least one lender approving your application.
When it comes to personal loan eligibility, however, it is quite the opposite. Applying to a lender is taken as a serious inquiry, and gets recorded in your credit history. Lenders always check your credit history, and if they note an applicant has made numerous loan inquiries, it will make you come across as a credit-hungry individual. Lenders frequently reject loan applications on this basis, especially if the borrower’s other personal loan eligibility criteria (such as CIBIL score, income, etc.) are weak.
Prevent this by narrowing down a list of lenders whose basic personal loan eligibility criteria you meet in full. Target your approach and only apply to 2-3 of these lenders at a given time.
Your personal loan eligibility determines whether you will qualify for a loan from a particular lender. You can also use a personal loan eligibility calculator to find out whether you qualify for a loan from the lender.