Financial emergencies can occur at any time without any warning. At times, everything might seem to be going smoothly, and at times you may face a situation where you need immediate cash to meet emergency or unprecedented expenses. In such a situation, the best way to get the necessary funds is to apply for a personal loan.
In India, personal loans are the most sought-after credit option for planned and emergency expenses. Since these loans are unsecured loans, lenders have strict eligibility criteria for personal loans category to minimise the lending risk. So, if you want to apply for a personal loan, then here are a few effective tips that will help increase your chances of getting approval for the loan.
Tip 1 – Maintain a Good Credit Score
Credit score is considered one of the important criterias for personal loan. It reflects your creditworthiness, i.e., your ability to repay the loan on time. Typically, lenders have a minimum credit score requirement of 700+. If you have a credit score of 750 or more, then chances are high that you would get your personal loan approved without any hassles.
Tip 2 – Avoid applying for multiple loans simultaneously
When you face a financial emergency, you may approach different lenders simultaneously for a personal loan. However, you must avoid this as it can affect your financial credibility. Lenders may view this behaviour from a different perspective and consider you as a credit-hungry individual.
So, apply with one or two lenders at the most. This will increase your chances of getting a personal loan application approved.
Tip 3 – Apply for a personal loan with a co-borrower
A regular income source is one of the important eligibility criteria for personal loan. If you don’t have the minimum income required by the lender, then you can apply for a personal loan jointly with your family as the co-applicant. Ultimately, the lender would want to ensure that you have the financial means to repay the amount you borrow.
If the co-applicant has a good credit score and high income, then you would have no problems in getting a personal loan from lender of your choice.
Tip 4 – List down a secondary income source
As mentioned earlier, high income is one of the most important criteria for personal loans. So, when you apply for a personal loan, and your regular or primary income does not meet the lender’s requirement, you can mention additional income sources (if any) in your application form.
For example, if you get income from rent, dividends from investment, your start-up business, etc., then the income will get added to your overall income, and you will have better chances of getting the loan approved. It may even increase your eligibility for getting a loan of higher amount.
Tip 5 – Choose a longer repayment term
If you are struggling to get a personal loan because you don’t have the minimum income required by the lender, then you can try opting for a long-term loan. You can choose the maximum loan tenure. This will not only increase the chances of personal loan approval but also reduce your monthly EMI.
Tip 6 – Be honest with the lender
When you fill out the application for a personal loan, make sure to provide accurate information to the lender. Remember, when you submit the form, the lender will verify each and every information you mention. If you deliberately hide or provide incorrect information about income or credit score, then the lender will outrightly reject your loan. This can further impact your credit score.
So, while applying for a personal loan, being honest is paramount. This will boost your chances of getting the loan, and the whole process will be much smoother.
Tip 7 – Check the lender’s eligibility criteria beforehand
The criteria for personal loan may vary from one lender to another. While it may seem the most obvious thing to do, i.e., check the lender’s eligibility requirements, most people overlook and ignore this critical step.
So, before you submit your personal loan application with any lender, visit their website, and check the eligibility criteria for personal loan. Check the minimum income and credit score requirements, the maximum age limit of the applicant, the maximum repayment tenure, and the documents needed for personal loan.
Knowing this will help you choose the right lender, and you will have high chances of getting the loan approved.
Tip 8 – Be wary of your financial condition
Even if you have the minimum credit score for a personal loan as required by the lender, your loan application may get rejected if the lender believes you cannot repay the amount you want to borrow. So, before you approach any lender, assess your financial condition carefully.
You must determine the maximum amount you can borrow so that the EMI is repayable. If the lender is assured that you have the necessary financial means to repay the amount, then there are high chances that your loan will get approved.
Tip 9 – Know the documents required
No matter what type of loan you want to apply for, you must comply with the documentation processes. It is advisable to know the documents needed for personal loan beforehand and keep them handy to avoid any last-minute hassles.
If you fail to submit any of the documents, then it will lead to further delays in the approval process. In worst case scenario, the lender might deny giving you the loan. But, if you submit all the papers, then you have better chances of getting the loan.
Tip 10 – Leave a gap of a few months before applications
Since multiple or repeated loan applications have a negative impact on your overall credit score, you must leave a gap of 6-8 months between loan applications. If you can hold on the loan process, then it is advisable to hold till your credit score improves, and you will be in a better position to get your loan approved.
Applying for a personal loan is a great way to get funds to meet your immediate or emergency expenses; ranging from a medical emergency in the family to a business expense. Since a personal loan is an unsecured loan, no collateral is required, and you can use the amount for any purpose you want.
Today, many government and private financial institutions like Tata Capital offer personal loans at affordable interest rates starting from 10.99%. So, getting a personal loan is easier than before.