A personal loan is one of the popular kinds of loan prevalent in the market currently. Personal loans come in handy when there is any unplanned or planned expenditure like weddings, vacations, or medical expenses that you see going beyond your financial potential. Individuals need money for various reasons, particularly post-pandemic, which has brought the economy to a standstill position and has aggressively impacted many lives. This explains why in our country, 77 per cent of individuals depend on a personal loan from top lenders like HDFC, Kotak personal loan, ICICI banks, etc., to mitigate their end requirements. Availing of a personal loan is looked upon as a good route if you can comfortably make your repayments during the loan tenure.
This said, to qualify for a personal loan, you must meet the major eligibility criteria laid out by the top lenders. Read on to learn about personal loan eligibility and how to ameliorate your chances of securing a personal loan. Before this, note that there are 2 major ways to check your status for a loan, may it be Kotak personal loan status or HDFC or any other personal loan lender; the firstly is by visiting the personal loan lender directly, and the second is through the online medium.
What makes a personal loan a suitable choice?
Before you look at the personal loan criteria and the crucial benchmarks that you must mitigate to avail the application for your personal loan approved – let’s try and understand why personal loan has become a preferred loan option for many individuals today.
One of the basic reasons why personal loan is opted for by many is owing to their unsecured nature. Unlike a car loan or home loan, borrowers of personal loans do not need to offer any kind of collateral or security to the lender to get the loan approved. As there’s no security required, the documentation required to place the application for a personal loan is way lesser than any other loan type.
The next key reason why individuals choose to avail of personal loans is that once they get approved for a personal loan, they can use the proceeds of the loan as per their own requirement for any purpose. Lenders do not place any restriction or any type of limitation on the fund’s end usage secured through a personal loan. From repaying your long-standing debts to arranging a home or car down payments and outstanding credit card dues to financing your home renovation – there is a wide range of expenditures for which you can use the personal loan. Lastly, the personal loan rate of interest is usually fixed. This means the rates do not keep differing on a time-to-time basis like the credit card finance charges. This way, you may not just be repaying a fixed amount each month but will also be tracking your payments with ease.
Indian working class shoulders a great lot of responsibilities and, in most cases, considers it extremely difficult to survive the monthly income, which happens to be only sufficient to mitigate your daily expenditures. Struggling to mitigate your needs with zero additional savings may make it tough for you to cope with unanticipated expense rises. In such scenarios, when you are not able to secure an instant loan from a bank, you can arrange the required funds from digital lenders.
Eligibility of personal loan – explained.
When you require a particular amount or are short of funds, you can simply approach a financial entity to place a personal loan application. Though you can apply for a personal loan easily for the required loan amount, you must meet the required set of eligibility parameters. Based on specific limits and general needs, the personal loan eligibility criteria may vary from lender to lender.
Mentioned here are some of the important basic parameters you must meet –
∙ You must fall between the age limit of 18 and 60 years.
∙ You must be an Indian.
∙ You must have a good work experience of nearly 1 year.
∙ You must be drawing a monthly income of not less than Rs 15,000.
Additionally, along with a filled-up application form, you even require furnishing the listed documents to the bank lender –
∙ A current passport-sized photo
∙ Income proof and salary slips
∙ Address proof like an Aadhaar card, driver’s license, passport, or voter ID.
∙ Identity proof like an Aadhaar card, PAN card, or government ID, in case you are employed by the government.
Keep a thorough check on your credit score. Note that a credit score is a 3-digit number that ranges between 300 and 900 and shows your credibility. This score is also imperative to make sure of your eligibility for a personal loan.
How to ameliorate your chances of availing of a personal loan?
Financial institutions look at various parameters to decide your credibility as a borrower. Listed here are the top tips that can assist you in enhancing your chances of securing a personal loan.
Check the eligibility criteria of the lenders.
Before you zero in on a lender, make sure to scan through all your needs and requirements. Doing so will assist you in avoiding any rejection for a trivial reason like income or age.
Track your FOIR (fixed obligation to income ratio)
When you use a high per cent of your income for making repayment of your existing debts, it, in turn, lowers your credibility for securing another loan. This can reduce your chances of availing an approval for a personal loan or, worse, propel the lender to charge a higher interest rate to cover the additional risk.
Always make sure that you maintain a FOIR of 40 per cent to 50 per cent. To enhance your chances of securing a loan, you may even consider repaying your liabilities as well as your credit card dues.
Apply for the correct loan proceeds
To get your personal loan application approved, you must apply for the correct amount. Before you move ahead to place the application for a personal loan, use the online personal loan calculator to know your eligibility for a personal loan depending on your current income, liabilities, and other important factors.
Avoid applying for a lot of loans at the same time.
When you are in requirement of exigency funds, you might end up applying for a personal loan with various lenders to enhance your chances of securing loan approval. While it may endow you with the hope that you will get loan approval from at least a few of the lenders, it is not the best move to go about. Every loan application that is submitted results in a hard enquiry on your credit report, which lowers your credit score ultimately.
Ameliorates your credit profile
Lenders pay good attention to your score when scanning your loan application. As mentioned previously, as part of the personal loan eligibility parameter, you must ensure you have a strong credit score. Having a good score equaling 750 and above is looked upon as good.
Lesser your score, the lower your chances of securing a good loan deal. A few of the best moves to ameliorate as well as maintain your score are – repaying your EMIs and credit card dues by the due date, lowering your debt-to-income ratio, diversifying your credit portfolio, and maintaining a lower CUR (credit utilization ratio).
Add in a parent or spouse as co-borrower
In most scenarios, there is a choice to involve your parent or spouse as a co-applicant. It assists particularly when your profile is not a satisfactory condition. If your co-applicant or guarantors’ credit score and income are high, then adding them to your personal loan enhances your chances of securing loan application approval.
Select your lender well
Before you zero in on any lender, it is recommended to thoroughly research all the options available in the market. Even if you have a dire requirement for funds, do not settle for the very first lender you meet. Presently, there is a wide range of lenders flooded in the market offering favourable lending conditions. Ensure to conduct a strict review to get the best personal loan offer available in the market.
Ensure to mention all your income sources
When you apply for an instant personal loan, you must show your repayment capacity. So, in place of providing the lender with just your income details, ensure to furnish the lender with also information about your additional income, if any, like rent, freelance, etc. This would not just enhance your chances of availing of a loan but even make you eligible to get a higher loan to proceed.
