As a prudent mode of finance that can be used to address expected and unexpected needs, the demand for personal loans has gone up by leaps and bounds over the years. Digital disruption and the evolution of non-banking finance companies (NBFCs) have sped up the growth of the personal loan space, and today you can apply for these loans, in a breeze, through mobile apps.
However, lenders do not entertain all the personal loan applications they receive. While there can be several reasons for rejection, some of them result from your financial habits, such as a poor credit score. Here are some tips to follow that will make it easy for you to avail of a personal loan.
1. Pay your EMIs and bills on time
Paying off the EMIs of current loans and bills on time prevents a dip in your credit score. For lenders, your credit score is a reflection of your creditworthiness. Defaulting on EMIs or paying bills late can dent your score and throw the entire borrowing exercise off track.
While you can avail of a personal loan on a low score, it will attract a higher interest rate, increasing the EMIs.
Hence, as a responsible borrower, you must ensure you always pay EMIs of existing loans and other bills on time. Setting up an electronic clearing service (ECS) mandate with your bank is a good way to avoid missing payments.
2. Using too many credit cards too often
Having outstanding credit lines owing to multiple credit card usage could hurt your credit scores and make you appear potentially risky to lending institutions. Also, using multiple credit cards can make it challenging to keep track of your spendings and payment overdue. That said, it’s not unwise to have a primary credit card for significant spending and backup cards for specialised purposes.
3. Avoiding discretionary expenses
Financial prudence calls for distinguishing between needs and wants. Be it peer or societal pressure; often, we end up spending on items that can be missed. Eating out often, buying high-end mobile phones every few months, splurging on a vacation often, etc., are all discretionary expenses that strain your finances.
Stemming frivolous expenses would result in savings that will help you manage most of your needs. In such a case, even if you need a personal loan, the amount wouldn’t be high. A low-amount loan is easier to process and procure. Also, the savings made by cutting unnecessary expenditures would help you pay the EMIs with ease.
4. Reducing your existing liabilities
Reducing existing liabilities incurred in a home or car loan goes a long way in availing of a personal loan. Note that financial institutions are wary of lending borrowers sitting on a pile of debt. Prepaying big-ticket loans such as a home loan reduces the EMIs and brings down the tenor. With reduced liabilities, the chances of getting an instant personal loan go up by several notches.
Pre-approved offers on personal loans and others such as home loans and business loans from Bajaj Finserv makes it easier to avail of finance in times of need. Share your basic details to know your pre-approved offer now.
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