Ways to Improve Your Personal Loan Eligibility

A personal loan has become the ideal choice for borrowers who need instant funds to address financial emergencies. Non-Banking Finance Companies (NBFCs) have also contributed to the popularity of personal loans, as they have made them easily available with minimum documentation and quick processing. Unlike other loans, availing a personal loan requires no collateral. The loan amount that one wishes to avail of depends entirely on the borrower’s credit history and credit score.

An individual can utilize the personal loan funds for several purposes, such as a wedding, a medical emergency, buying assets, or repaying other debts. While applying for a personal loan at Muthoot Finance, you can use the personal loan EMI calculator just to get an idea of what you will be paying as part of the repayment process.

Since personal loans are a form of unsecured loan, there are some eligibility criteria that borrowers need to ensure of. The most important point that borrowers should consider is the interest rates because they may differ from lender to lender. Personal loans eligibility checks are based on factors such as repayment ability, income source, profession, CIBIL score and employment history.

Let’s see how we can improve our personal loan eligibility:

Maintain a Credit Score of 750

This is one of the most important aspects that lenders consider when borrowers apply for a personal loan. Your credit score is an amalgamation of your past credit activities that is denoted in numbers. Individuals with a credit score of 750 or above are considered to be responsible borrowers, which eventually enhances their approval chances. A good credit score will also help you avail a personal loan at minimum interest rates.

Ensure Paying Credit Card Bills & Existing Loans Timely

Prior to applying for personal loans, make sure to clear your existing loans. Doing this will boost your debt-to-income ratio and will eventually improve the chances of approval. If you already have multiple credit card bills and existing loans, it is likely that your lender may not approve your personal loan application. The lender may assume that you don’t have enough money and are likely to miss or skip EMIs.

A Lower Debt-to-Income (DTI) Ratio

This is the most important factor that lenders consider while determining whether you qualify for a personal loan or not. The debt-to-income ratio displays your gross monthly income that is used to pay off your existing debts on credit cards and EMIs on repayment of loans. Lower DTI shows the lender that you have sufficient income for managing additional debts. Most lenders consider a DTI ratio below 40%. You should maintain a lower DTI, as low as possible. Doing this will improve the chances for approval with more favourable terms & conditions.

Choosing a Lender with Easy Eligibility

While applying for personal loans, choosing the right lender is important because different lenders have different terms and conditions. On your part, it is of utmost importance to research different lenders and pick the right one that suits your profile. Choosing a lender with hassle-free and minimal documentation may increase the chances of loan approval. If you meet all of your lender’s eligibility criteria, then the lender should approve your loan application within 72 hours of receiving your documents.

Avoiding Sending Too Many Applications

While it may seem something petty to you, as you are only inquiring and exploring options on personal loans. But this is a serious red flag for lenders, as they may assume that you heavily rely on credit. Inquiring about personal loans frequently can lower your credit scores and show that you are under financial stress. Rather than sending out applications, make use of online tools such as the personal loan eligibility calculator to check whether you qualify for the loan or not.

Job Stability/Consistent Source of Income

Having a stable job indicates to the lenders that you aren’t a risky borrower, as you have a fixed source of income and can pay your debts in a timely manner. On the other hand, if you own a business, a consistent source of income to prove your self-employability may work in your favour, ultimately improving your personal loan eligibility.

From a healthy credit score to a steady source of income to keeping your debts under control - all of these contribute to enhancing your personal loan eligibility. As a borrower, your financial records don’t just help you secure a loan. It also helps you build a lasting trust with your lenders, which may be very important in the future.

Muthoot Finance is dedicated to ensuring that everyone has easy access to a variety of financial services. Before applying for a personal loan, you can check the eligibility criteria on our official website and read the terms carefully.