In the time of financial crunches, it is personal loans that come in handy and is preferred above any other mode of borrowing money as the personal loan is a type of unsecured loan. Hence, it requires less paperwork and can be sanctioned in a few days. Personal loan documents process varies from lender to lender for salaried and self-employed individuals. The amount of money, rate of interest, and tenure sanctioned depend upon the various factors like income of the borrower, loan repayment history, credit score, and many more. As the credit score of an individual can vary from 300 to 900, lenders prefer borrowers with credit scores surpassing 700. Higher the credit score higher are the chances of approval of a personal loan. One can use a personal loan eligibility calculator to check whether they are eligible for a personal loan or not.
Personal loans can vary according to their borrower’s purpose in terms of amount and tenure. Some personal loans can run for years, and some loans like payday loans can be due in just a couple of weeks after being sanctioned. In a payday loan, if the borrower repays the whole amount within a short period, then he/she would not have to pay any interest, but they have to pay an origination fee. To increase your chances of approval of a personal loan given below are 5 tips which can come in handy:
- Try not getting a default on your loan EMI’s:
One can increase their credit score by paying their monthly installments on time. Paying your existing loans’ EMIs on time indicates that you are disciplined and are capable of paying your loan installments. If you default in paying your EMI, the lender will hesitate to extend your period of personal loan, and it can also bring down your credit score.
- Never make multiple loan inquiries:
If you are planning for getting a personal loan, then do not apply with numerous lenders because they will believe that you are a credit hungry customer and will most likely decline your loan application. So it is recommended that before applying for a personal loan, compare loans from different lenders. Making multiple loan inquiries can also impact your credit score.
- Always pay your credit card bill on time:
Before sanctioning a personal loan, lenders always track your credit card bill payment history. It is advised to clear your credit card dues within the date. Doing this will not only improve your credit score, but it also increases your chances of getting a personal loan.
- Try not to apply for personal loan frequently:
Applying for a personal loan often will have a severe impact on your credit score, and it also lowers your chances of getting a personal loan. It will give a wrong impression on the lender that you are a reckless spender and unable to control your debt.
- Minimize the use of a credit card:
Lenders track your credit card utilization ratio while deciding your personal loan eligibility. The credit card utilization ratio is derived by dividing the credit availed by you through all your credit cards with the total limit available on all of your cards. Lenders always prefer customers having a low credit utilization ratio.
Benefits and features of personal loan
There are many advantages which can be availed by the borrower:
- Instant disbursal: one can get instant approval and disbursal of a loan in minutes.
- Less paperwork: less paperwork is required for your application.
- No collateral: no security deposit is required.
- Flexible loan period: one can choose loan tenure according to need and requirement.
- Decent interest rate: interest rates are fair.
Type of personal loans can vary from person to person according to their need, and it is essential to compare different lenders before applying for a personal loan. There are many ways through which one can increase the chances of getting a personal loan like by maintaining their credit score, and by repaying monthly installments on time. Just keep in mind always borrow within your means and never borrow more than you can afford to pay.