When taking a personal loan, you should be very careful about the eligibility criteria for personal loans. Meeting this criterion is necessary if you want your personal loan to be approved. Personal loans are some of the most sought-after solutions for raising funding for diverse situations.
The benefits of personal loans include quick and seamless application and processing as compared to conventional loans, the absence of collateral requirements, easier repayment and multipurpose usage right from medical emergencies and home renovation to weddings and higher education needs. While it is recommended that you use an online eligibility calculator for working out the loan amount that you are eligible for, there are some other tips that you must also keep in mind:
- Choosing the Lender- You should choose your lender carefully. In an ideal scenario, you should apply for a personal loan with the financial institution where you already have a relationship. If you already have another loan with a lender and are paying your EMIs in a timely manner, your personal loan eligibility may be higher since your application will be favorably considered. If you are a salaried professional, choose a financial institution where you have your salary account. Additionally, NBFCs and smaller private banks tend to be more liberal when it comes to the eligibility criteria as compared to regular public sector banks and big private financial institutions.
- Use CIBIL score wisely- Did you know that there are 4 credit bureaus where you have slightly varying credit scores. Before applying for a loan, it is worth putting in extra effort and finding out credit scores from all four bureaus. This will help you apply for a personal loan with a financial institution that refers to a bureau where you have your highest credit score.
- The Loan Purpose Matters- You should always apply for a personal loan in your own name instead of applying for someone else. Be clear about why you are taking the loan and how you will repay it. Normally the purpose of the loan is asked by lenders. The personal loan eligibility depends on the purpose to some extent. For example, if you are taking the loan to meet a major requirement like a wedding or home repairs, you can expect higher loan eligibility as compared to taking a loan for funding a foreign vacation or any other luxury.
- Clearing Unsecured Loans- A personal loan is an unsecured loan (one that does not need any collateral to be submitted). Before applying for a personal loan, you should try to repay all your other unsecured loans. This will help you scale up your Personal Loan Eligibility. If you have a home loan then your loan eligibility will automatically be very low since a home loan increases the net take-home income to EMI ratio and takes up almost 100% of your entire credit eligibility.
- Net Income Matters- Your net salary should be taken into account since this is what influences personal loan eligibility. Your gross salary after tax contains all perquisites and allowances. You should deduct these to get your net monthly salary. You can merge these with the basic salary but your tax outgo will be higher although the personal loan eligibility may go up.
Plan properly before applying for a personal loan. These 5 golden tips will help you increase personal loan eligibility.