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.
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.
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.
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.
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.
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.
Here is an example of eligibility criteria of a salaried employee if they reach Tata Capital-
Documents that a salaried employee needs to submit if he/she apply for a personal loan with Tata Capital
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.