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In the time of financial crunch, most of the people reach banks and other financial institutions for a loan. There are various types of loans which are available in the market to fulfil the cash crunch of people when in need. If a person is looking for money if he/she has a wedding, medical emergency or to go for a vacation or any other personal emergency then, personal loans are the perfect option.
Personal loans are unsecured loans with flexible repayment tenor available. A personal loan is a preferred choice among many as it involves less documentation and disbursal time is very fast. To be eligible for a home loan bank considers the factors like age, income, credit score, prior credit liability.
Tips to improve your eligibility for personal loans
Never default on loan EMIs
To improve the credit score it is important to pay your EMIs on time. Making timely payments not only improves the credit score but it also helps in extending a personal loan if needed. Your EMI payment schedule reflects how disciplined you are when it comes to repayment of loans.
Pay credit card bills on time
Before you apply for a personal loan make sure that you have a good credit card payment history. Clear all the dues within the time frame which has been approved by the bank. This ensures that you can make the EMIs on time and automatically increases the Personal Loan eligibility.
Do not use credit card frequently
With the change in the borrowing behaviour, more and more people are opting for credit cards but one thing which has to be kept in mind is that credit cards should be used only when you are in need. While deciding if personal loans should be sanctioned or not banks track the credit utilisation ratio. It is a calculation that represents the total debt a borrower is utilizing in comparison to the total revolving credit that they have been approved for by credit issuers. If your credit utilisation is low then banks will prefer you. Credit bureaus also use credit utilization as one factor to calculate the credit score.
Do not apply for personal loan frequently
Apply for a loan when you are actually in need of money, if you apply too frequently it can severely impact your credit score. Applying for a home loan too often will reduce the credit score. In such a case, the lender will get the impression that you are not disciplined when it comes to borrowing.
Do not make multiple loan enquiries
Don’t act like a greedy borrower, apply for bank loan enquiry only with a lender who is offering all the facilities that are required. Make sure to compare the benefits from different lenders to choose the best out of the lot. Multiple bank inquiries will decrease the credit score, so make sure you don’t do that and banks might also reject loans if many inquiries are placed from the borrower’s side.
Eligibility criteria for a personal loan for a salaried employee
Here is an example of eligibility criteria of a salaried employee if they reach Tata Capital-
- A borrower must be in the age group of 22 to 58 years
- A borrower should be earning at least Rs 15,000 per month
- A borrower must have a work experience of at least one year and many lenders also have criteria where he/she should have worked with the current company at least for six months.
Documents that a salaried employee needs to submit if he/she apply for a personal loan with Tata Capital
- Identity proof like Voter Card, Aadhaar Card, driving license
- Address proof- Passport, electricity bill, telephone bill
- Income documents – Copy of bank statements for the last six months and a Pan card
- Employment Certificate – A borrower will have to submit a certificate which states that he/she has been working with an employer for more than a year
Now that we have discussed how you can improve the eligibility for a personal loan, most importantly your credit score should be within the range which is prescribed by the lender and credit card usage should be reduced if you don’t want your loan to get rejected.