A personal loan helps you take care of your personal financing needs. The personal loan amount can be used to handle several financial emergencies including payment of education fees, medical bills, home renovation, starting a new business, vehicle repairs, travelling and others. However, to be eligible to get a personal loan, it is imperative that you meet the lender’s eligibility criteria. The criteria to get a personal loan may vary from lender to lender, but every lender in India checks on your age, income, credit score, residence type, employment type and other factors to assess your credit eligibility. If your personal loan application is rejected or if you want to improve the chances of approval of your application, then it is significant that you follow the below tips.
Check on the credit score: Your credit score is one of the important data points checked by the lender when assessing your loan application. The score determines your credit worthiness and repayment behavior, thereby helping the lender decide on the risk associated with approving your credit application. Each lender in India has a minimum credit score requirement that you need to cater to to be eligible to get a personal loan. Having a low credit score is a sign of poor credit behavior, whereas a high score reflects responsible credit behavior. Additionally, a high credit score helps you get high loan amount at a low interest rate, whereas a low credit score can lead to loan rejection or approval of the same at a high rate of interest.
Check on the status of your employment: Each lender in India requires you to have minimum work experience of 1-2 years, while being employed with your current organization for a period of 6 months. Additionally, lenders also check on your company status i.e. whether it is listed or not and whether it is a private, public, proprietary or a LLP.
Comply with the minimum income requirement: Few lenders in India require you to have monthly earning of Rs. 10,000- Rs. 15,000 to be eligible to get a personal loan. Though this factor may vary from lender to lender, it is always a good idea to check on the website of the lender and only then proceed with your application. The income requirement may also vary depending on the state and city you reside in.
Monthly debt to income ratio: Your monthly debt to income ratio reflects your ability to repay the loan amount you desire to borrow. Having a high debt to income ratio can lead to rejection of loan and can have a negative impact on your credit score. Therefore, it is always advisable to repay your existing loan before applying for a fresh loan.
Check loan eligibility online: Use a personal loan eligibility calculator that helps you get an estimate of the loan amount you are eligible to get. Using the calculator ensures that your loan application is not rejected.
Make no mistakes in your application: If you hide any facts from the lender then your loan application is likely to get rejected. Remember, lenders hire third party agencies to verify your employment, residence and income details. Any misrepresentation of facts can lead to rejection of your application. Even if you have a good credit score, then the lender can reject your application on the said ground.
Common reasons for personal loan rejection:
- Low credit score
- Submitting incorrect details i.e. income, employment status, residence type
- Loan settlement
- Having high credit card outstanding
- Signature mismatch in documents
- High credit utilization
- Employer not being listed with the lender
- Multiple applications