September 26, 2022

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How to improve chances of getting a personal loan approved

Quick disbursal, minimum documentation, zero restriction on end-use of loan proceeds and no collateral requirement make personal loans an ideal borrowing option for fulfilling urgent monetary needs. Personal loan rates are at multi-year lows at present, said Gaurav Gupta, founder and CEO, MyLoanCare, a loan portal.

Banks have again started focusing on offering personal loans but with stricter credit policies now, targeting customers working with reputed companies and the ones who can demonstrate continuity in jobs. “Given that we are just coming out of a lockdown, people applying for a personal loan in 2021 should ensure that they must not be under any covid-related loan restructuring; should have paid at least the last three EMIs on existing loans and cards; and should be receiving their salary regularly without any covid-related reduction or delay,” said Gupta. Remember that frequent job-hopping can also indicate an unstable career.

Here are three things that can improve your chances of getting a personal loan approved in 2021.

Credit profile

Lenders check the credit score for assessing the applicant’s creditworthiness for availing a personal loan. Gaurav Aggarwal, director, unsecured loans, Paisabazaar.com, said that generally, applicants with a score of 750 and above have higher chances of getting a loan approved.

Try and build and maintain a strong credit score. “For that, adopt healthy financial habits like timely repayment of your EMIs and credit card bills, restricting your credit utilization ratio within 30{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}, maintaining a healthy credit mix, and monitoring co-signed loan accounts,” Aggarwal said. Credit utilization ratio is the amount you currently owe on your credit card divided by your credit limit.

Repayment capacity

“Apply for a personal loan amount that you can service comfortably with your current earnings,” said Gupta.

Lenders also tend to prefer applicants whose loan repayment obligations (including the proposed personal loan’s EMI) do not exceed 50{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}, said Aggarwal.

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Begin your loan search by contacting banks and non-banking financial companies (NBFCs) with whom you have existing consumer relationships for their personal loan features and service terms.

However, be careful about making multiple applications. “Making multiple credit enquiries within a short period can depict you as a credit hungry borrower,” Agarwal said.

Enquiries at online financial marketplaces do not affect your credit score and can give you the required information.

But don’t just compare the interest rates, look at loan features and costs too.

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