When you apply for a personal loan, there is no assurance that the lender will approve your application. Along with this, every time when your loan application is rejected, it hampers your credit score and chances of getting a new loan in future.
The fact that you can apply for personal loan online makes it a popular choice, however, it is necessary to consider a few points to get your loan approved. Here, are some of the ways through which you can improve your personal loan success rates.
Check your credit score
Since personal loans are unsecured loans, i.e., there is no collateral involved, lending institutions take every step to protect their money against customer default. They depend on your credit score to check your past record of repayment. If you have a low credit score, the chances are high that your personal loan application will get rejected.
Before approaching any financial institution, it is advised to obtain a copy of your credit report and check your score. You might be thinking that you have a good score as you are paying all your EMIs and other bills on time. However, there might be other factors as well, which could lower your scores like a high credit utilisation ratio, guarantor to a defaulted loan or reporting mistakes which can impact your credit report.
To get your personal loan application approved, make sure that you have a credit score of at least 750. If your score is below that, identify the weak areas in your credit report and work towards improving them.
Ensure you have adequate income
Again, due to lack of security, lenders rely on your monthly income to see if you would be able to repay your loan or not. In a situation, where a lender feels that a loan applicant would face problems in repaying the loan, they might turn down the loan application. So, apply for the loan amount in accordance with your repayment ability,e., your income.
Avoid approaching multiple lenders
You might find it normal to approach several lending institutions at the same time in order to strengthen your chances of being approved by at least one lender. However, this is a bad idea!
When you apply to several lenders at the same time, you are being considered as a person who is ‘hungry’ for credit. Further, too many loan applications without proper corresponding approvals can also trim your credit score. So, make sure you always apply with only that lender with whom you have the best chances to get approval.
Give adequate information
In case your personal loan application has incorrect information or discrepancies, your personal loan may get rejected. So, duly fill your personal loan application form with correct information to improve your loan success rates. In a situation, where you are applying for personal loan online, you can contact the lender and clarify your doubts, if any.
Ensure current liabilities are not more than 30% of your income
Lenders want to judge whether you have sufficient income left after paying all your existing loan obligations to take a new loan or not. They might review your current EMIs to check your repayment ability.
If they think that your current financial ability doesn’t allow any new loan, your personal loan application may get rejected. To avoid this, apply for a loan amount that you can easily repay. In any case, your current liabilities shouldn’t be more than 30% of your income.
Further, if you are a salaried professional, make sure that you have been in the same company for the minimum six months before you apply for a personal loan. Banks insist upon employment stability and a steady flow of income in order to check your repayment ability. In case, you are changing jobs frequently; the chances are high that your loan application may get rejected.
Along with banks, there are non-banking financial companies (NBFCs) as well, which are offering personal loans online at easy interest rates. Further NBFCs have a flexible repayment schedule and easy processing mechanism, thereby facilitating quick approval. So, consider the above-listed facts and approach NBFC to get a personal loan.