10 Tips to Improve Chances of Personal Loan Approval

A personal loan is one of the most convenient ways for people to access funds in case of an emergency. The popularity of these financial solutions has only risen in recent years, with the introduction of the instant personal loan that people can avail online with ease. As a personal loan has no limitations on the end use of the funds available, it can be used for various purposes, like debt consolidation, home improvements, or emergency expenses.

A personal loan is unsecured, which means that it does not require collateral and is disbursed solely on the basis of the borrower's eligibility. The eligibility criteria for a personal loan are quite specific, and at times, it might be difficult for certain individuals to meet the requirements.

Key Ways to Improve Your Personal Loan Approval Chances:

Maintain Stable Income and Employment

This is one of the primary eligibility criteria that you should look at. Most lenders prefer borrowers who have a history of stable employment and can prove a consistent source of income. This is because a stable job and regular income demonstrate a borrower’s ability to repay the loan. You should avoid changing jobs too frequently and not leave employment gaps in your history during the application for a personal loan. You should be able to provide documents for employment and income proof that showcase stability.

Assess Your Loan Requirements

Before you apply for a personal loan, it is important that you assess your exact requirements to understand how much money you need to borrow. The amount that you need might be significantly lower than a lender’s maximum amount, and you shouldn’t borrow more than what you strictly need. A lower amount that aligns with your income and repayment capacity has more chances of being approved.

Lower Your Debt-to-Income Ratio

Your debt-to-income (DTI) ratio is a percentage that compares your monthly debt to your gross monthly income and is used by lenders to assess the risk involved in giving a personal loan. The DTI is one of the most important factors considered by lenders in determining if an applicant qualifies for a personal loan or not. A lower DTI demonstrates that you have sufficient income for managing additional debts. You can lower your DTI by either increasing your gross monthly income or by reducing the amount of monthly debt by paying off loans, credit cards, etc., faster.

Check and Improve Your Credit Score

Your credit score plays a very important role in determining your personal loan eligibility. Lenders assess your creditworthiness on the basis of your credit score, which reflects your history of credit utilisation, loan repayments, etc. Most lenders look for a CIBIL score of 700 or higher. Before applying for a personal loan, you can check your credit score. If it is below the required range, you can take several steps to improve it, like paying your bills on time, avoiding new debt, and reducing your credit card balance.

Suggested Read: 10 Tips to Improve Your 300 Credit Score?

Pay All Bills on Time

Paying all your bills on time significantly improves your personal loan approval chances. Timely bill payments contribute to a strong credit history and score, showcase financial discipline to lenders, and show that you can manage debt responsibly. All of these make you a less risky borrower for lenders, which allows them to offer you better interest rates and borrowing terms.

Research Different Lenders

Make sure that you put in the due research and compare personal loan offers from various lenders. Each will have its specific eligibility, interest rates, and borrowing terms. Researching and comparing different lenders will help you find the best loan options with favourable terms that align with your needs. Looking into customer reviews can also help you gain valuable insights into the credibility and customer support offered by different lenders.

Avoid Multiple Applications

Putting in multiple personal loan applications within a short period of time may impact your credit score negatively and signal desperation to lenders. Every time you put in a loan application, it triggers a hard inquiry into your credit report, which can temporarily lower your credit score. It is a better idea to first assess your options carefully, research lenders, and apply selectively for personal loan options that fit your needs and eligibility.

Provide Accurate and Complete Information

When you apply for a personal loan, make sure that the information you are providing is accurate and complete. Make sure that you double check everything, including your personal information, income details, existing debt, etc. Any inconsistencies or incorrect details in the application can lead to rejection or delays in your personal loan application.

Gather All Your Documents

Have all your personal loan documents, like your identity proof, proof of address, income proof, bank statements, etc., ready before you start applying. You can create a basic checklist of the documents you will need during the research stage. Having complete and legible documentation at hand can speed up the verification process.

Suggested Read: Understanding Maximum and Minimum Tenure for Personal Loans?

Consider a Co-Applicant

If you have a low credit score or an insufficient income to meet the eligibility criteria of the lender, you can consider applying for a personal loan with a co-applicant. A co-applicant holds equal responsibility for repaying the loan, which is why their income and creditworthiness are also taken into account during application assessment. A co-applicant with a strong financial profile can also improve your chances of personal loan approval.

Getting your instant personal loan application approved requires due research and consideration. By focusing on aspects like your CIBIL score, evaluating your financial profile, researching lenders, and ensuring an accurate application, you can significantly improve your chances of personal loan approval. With the right approach and preparation, you will be able to secure the right personal loan that meets your financial needs well.