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Personal loans are an effective way to counter a monetary emergency that comes about unabated and threatens to hamper the balance of an individual's family. These also come in handy when individuals run short on cash but have some planned expenses, such as marriage, vacations, or medical emergencies. While they are helpful in many situations, the difficulty in getting a personal loan proves to be a difficult nut to crack for most.
This article discusses some invaluable tips that can boost an individual’s chances of getting a personal loan.
Before getting into the nitty and gritty of the chances of getting a personal loan, it is imperative to understand why they have become so popular with time. One of the main reasons is that personal loans are unsecured. It means even those who do not have enough collateral to raise money can get it. Additionally, the documentation is more streamlined because of the lack of collaterals, making it less hectic for both the borrower and the loan provider. In most cases, personal loan interest rates are fixed. It means they do not vary, unlike other funding methods, such as housing loans and credit cards. It ensures that the borrower knows how much to pay periodically while enabling them to track their payments seamlessly. Personal loans have no limits on how the borrower can use them. From marriages to home repairs to debt consolidation, an individual can use the money for many purposes. Personal loans can be obtained easily, but loan providers often turn down applications.
How can people increase their chances of getting a personal loan?
Approval of a personal loan depends on many factors, making it a tricky affair.
Providers often consider an individual’s CIBIL score when approving or rejecting their loan request. The higher the score, the higher the chance of accepting the personal loan request.
For that, the applicant can check their reports to see if there are any errors. Even the most minute errors, such as incorrect credit limits and account details, can have a massive dent in the CIBIL score. If so, they can collect the necessary evidence and raise a dispute to help clean their credit history to improve their CIBIL score.
Borrowers must be careful about outstanding debt timely repayment. It would also help to pay more than the minimum amount whenever possible. Borrowers can improve their credit utilization ratio and their chances of getting a personal loan.
A high FOIR or fixed obligations to income ratio can reduce an individual’s creditworthiness when they apply for a personal loan. Even when the approval is not an issue, the lender may charge a higher interest rate to minimize their risk of default. A FOIR ratio between 40% and 50% is usually considered healthy for new loan approval.
People often seek a personal loan in a state of emergency. In such a crunch period, people usually end up applying to multiple lenders hoping to get something from at least one of them. But that is counterintuitive. Every loan application results in a hard inquiry and can cause a dent in the applicant's credit score.
Rising credit players in India mean people have many options to choose from while applying for a personal loan. Some promise easy repayment terms and interest rates to woo the individual into a credit trap. So, it is imperative to conduct thorough research even when the situation is dire rather than fall into a risky situation. Loan givers often run several offers, and the applicant can benefit from them if they research before applying for a loan.
For those with an average credit score, having a co-signer or a co-borrower, such as their parents or partner, can strengthen their chances of getting a personal loan request approved. The co-signer will have an equal liability to repay the loan, and if their credit score and income are on the higher side, the loan provider may be more inclined toward approving the request.
Once a borrower has chosen a lender, the next step is to check their eligibility criteria. While the differences may be minimal, the borrower may find an edge while applying. It will also protect the applicant from the pitfalls of rejection because of trivial reasons such as age.
If an individual meets the lender’s minimum qualifications, it will allow them to pre-qualify for a personal loan, which can significantly boost their chances of getting the request approved.
In most cases, applicants may not have enough time to level up their application immediately when the need for a personal loan arises. So, they must perform specific actions to increase their chances of securing the loan upfront. Follow these tips to ensure quick approval.
At Tata Capital, we understand that people may be going through financial emergencies when applying for a personal loan. We offer affordable and unsecured credit coupled with easy-to-meet personal loan eligibility criteria to be the partner they seek during difficult times.
Also, we have a flexible loan tenure of up to six years to minimize the burden on the borrower's pocket. Click here to learn more about Tata Capital’s Personal Loan facility.
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