How To Enhance Your Personal Loan Eligibility

Are you planning to go on a vacation? Hoping to renovate your house? A personal loan can help you borrow funds for different expenses and that too without collateral.

You can better manage your debt with the help of personal loans. But to get a personal loan sanctioned, you have to be eligible for it. There are a few things you need to consider while applying for a personal loan. However, you need not worry as there are many ways to improve your personal loan eligibility.

In this article, we will discuss the benefits and uses of personal loans. You will also learn a few tips on how to increase your personal loan eligibility.

What are Personal Loans?

A personal loan is a loan that can be issued for any use except to invest in a business or in stocks. This kind of loan is provided with little or no documentation and does not need any security or collateral.

The money from personal loans can be put to any financial use. You must pay it back according to the terms set forth by the bank, just like any other loan. Typically, a personal loan can be paid in simple equated monthly instalments over a few months to a few years.

Benefits of a Personal Loan

Here are a few advantages of a personal loan:

• Personal loans give you a lump sum amount that can be used all at once.
• Personal loans are approved comparatively faster which makes them helpful in times of emergencies.
• No need for collateral as they are a type of unsecured loan.
• The interest rates paid on personal loans are lower than that on credit cards.
• Personal loans come with very few restrictions on use and are flexible.
• These types of loans help you build a good credit score if you make your payments on time.

How to Improve Your Personal Loan Eligibility?

Below are a few tips that can improve your personal loan eligibility:

1) CIBIL Score: Lenders require information on your credit history. A good CIBIL score can assure your lender that you will repay the loan on time. This will help you get a personal loan faster. To have a good CIBIL score, you should have made your previous debt repayments of credit cards and other loans on time.

2) Higher Income: A higher income increases the likelihood of loan approval. This will serve as collateral for the lender to grant you the loan. You can increase your income by highlighting your additional sources of income, such as bonuses, variable pay, passive income from other investment opportunities, and so on.

3) Long-term Loan: Lenders usually provide repayment terms of up to five years. This leads to significantly lower monthly EMIs, which can be extremely beneficial. Long-term loan repayment has the advantage of allowing you to repay the loan at your own pace and in manageable instalments. Your credit score will improve if you make your EMI payments on time for long-term loans.

4) Avoid Multiple Loan Applications: Lenders run a credit report inquiry when you apply for a personal loan. These inquiries are recorded in your credit report as hard inquiries. Therefore, applying for several loans at once is a bad idea as it suggests that you are credit-hungry. You become a high-risk applicant as a result, and lenders might decline your request for financing. It is, therefore, best to weigh your options, use an eligibility calculator, and submit an application for a loan that meets your requirements.

5) Maintain a Good Debt-to-Income Ratio: The ratio of your gross monthly debt to your gross monthly income is known as your debt-to-income ratio. Suppose you have a home loan and you are paying an EMI of Rs. 40,000 each month from your monthly income of 80,000. Your debt-to-income ratio in this case would be 40,000/80,000= 0.5 which is 50%. This means that 50% of your income is going into paying your debts. To close this gap, you can either raise your income or pay off your debts. This will increase your eligibility for a personal loan by a debt-to-income ratio of 20% to 35%.

6) Amount of Loan: Apply for the appropriate loan amount to increase your personal loan eligibility. Using a personal loan eligibility calculator, you can determine how much loan you are eligible for based on your income, existing debts, and other factors.

7) Job Security: In addition to the above-mentioned factors, the stability of your employment is also very important for personal loan approval. Frequently changing jobs indicates irregular employment, which can result in rejection.

8) Choose an Appropriate Lender: Finally, to improve your chances of being approved, submit an application to a bank that meets the minimal requirements for personal loans. For instance, it’s not particularly difficult to meet the eligibility requirements for a Piramal Finance Personal Loan. Just a few conditions such as you must be an Indian citizen and between the ages of 23 and 55 and you must have a steady source of income and earn at least the city’s minimum wage.

The Bottom Line

The personal loans you take should be a good decision after closely looking at your ability for loan repayment. You can consult any lender of  Piramal Finance before making any decision. They will assist you in getting a personal loan approved easily and determining the best repayment option for you based on your monthly earnings. They will guide you through the entire process.

To read similar blogs, go to the Piramal Finance website. There, you can find more information about personal loan eligibility.