A personal loan is one of the modern saviours of financial emergencies. In a medical emergency, several individuals face rejections from lenders as they do not understand the personal loan eligibility criteria. If more people understand the way personal loan works, how evaluation creditworthiness happens, the chances of getting access to personal loans will go up.
Since there is a lot of uncertainty around the personal loan eligibility criteria, we bring the top 6 best practices to increase personal loan eligibility.
- Maintain a good Credit Score
- Financial institutions prefer individuals with a good credit score to evaluate their creditworthiness. A credit score of 700 improves the chances of getting access to a personal loan. Simple financial habits like repaying EMIs on time, closing old accounts and not exceeding the credit limit by more than 30% are some best practices for maintaining a good credit score.
- Avoid multiple loan applications.
- Individuals often apply with multiple lenders to get the best personal loan. Multiple applications end up negatively impacting the credit score. Applying for a personal loan using LoansJagat is a better way as it helps applicants to get offers from multiple lenders with a single application. LoansJagat provides loan offers from over 40 top Banks and NBFCs. Applicants can choose the best loan offer, use the personal loan EMI calculator to understand the implications.
- Longer repayment tenure helps.
- A longer tenure reduces the monthly instalment, the drain on income is lesser, increasing the chances of a consistent repayment of the personal loan. A longer repayment tenure also keeps the ratio of loan to income lower for a better credit profile.
- Add a Co-Applicant.
- Adding a co-applicant adds the total income as the income of both the applicants is clubbed together, increasing the capacity to repay a personal loan. Adding a younger co-applicant is an additional factor as financial institutions are often more comfortable lending to young applicants for added years of income.
- Use a cool-off period.
- Taking a personal loan should be a wise decision. Opting for a loan immediately after closing a personal loan shows casual financial behaviour. As a rule of thumb, a borrower should take a cool-off period of 6 months before applying for another personal loan. A personal loan is for financial emergencies or planned expenses, not a go-to option for ad-hoc obligations.
- Maintain a low debt-earnings ratio.
- The money needed in the form of a personal loan has to be lesser than the income for the possibility of repayment. Financial institutions use a proprietary debt-equity ratio as a parameter for sanctioning personal loans. Most lenders consider a debt-equity ratio of 36% or better for evaluating creditworthiness. Debt consolidation also impacts the debt-earning ratio as a borrower can reduce the monthly instalment by combining multiple loans and credit card outstandings.
Follow the above mentioned financial behaviours to increase your chances of getting access to a personal loan. Get better loan offers from leading financial institutions.
LoansJagat provides tools like a personal loan EMI calculator to understand the loan implications. LoansJagat also makes it easy for every individual to apply for an instant personal loan, get offers from multiple lenders before choosing the best personal loan.