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How You Can Increase Your Chances of Getting A Personal Loan

  • Highlights

  • Check Your Credit Score Before You Apply

  • Do Not Make Multiple Loan Applications

  • Have A Gap of Minimum 6 Months Between Loan Applications

  • Choose Your Lender Carefully

Personal loans are availed by individuals and used for a variety of purposes, from renovating your house, to going on an international vacation, to debt consolidation. They are usually unsecured, meaning you do not have to provide collateral, further making them an attractive option for customers. However, the risk for lenders is higher, and therefore personal loan interest rates also tend to be high. Moreover, getting approval for personal loans may be difficult.

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Here are a few steps you can take to increase your chances of getting a personal loan.

1. Check Your Credit Score Before You Apply

Your credit score is a measure of your ability to repay the loan. Therefore, the higher your credit score the better your chances of approval. Ideally, you should have a credit score of above 760 to get approved easily. If you have a lower score, it is better to wait and improve it, before you approach any bank or NBFC with a personal loan application . You can improve your credit by paying off your existing debt, paying all your bills on time, not maxing out your credit cards, etc.

2. Do Not Make Multiple Loan Applications

Don’t make multiple loan applications to different lenders, in the hope of getting approved by at least one of them. This makes you seem desperate for credit, which gives a bad impression that you need more than one loan to meet your expenses. Additionally, if you do not get approved for these loans, your credit score reduces, making it very hard to actually get approved for any type of credit.

Additional Read: 4 Ways To Get The Best Personal Loan Rate

3. Have A Gap Of Minimum 6 Months Between Loan Applications

It is better to have a gap of at least 6 months between your loan applications. Your lender will otherwise, doubt your ability to repay the loan. If your reason to avail the personal loan is non-urgent, wait a few months before you apply to have a better chance of being approved.

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Your CIBIL score and your personal loan

Lower the interest rate, lesser the money you repay on the loan you borrow; this is the simple logic behind unsecured personal loans. But lenders do not assign the interest rate arbitrarily. They consider your credit score – a measure of your creditworthiness – to assign you the interest rate for your personal loan.

Your credit score ranges from 300 to 900. The higher your credit score, the better are your chances of getting approval and favourable terms on your personal loan. Lenders like Bajaj Finserv give preference to a credit score of at least 750 during personal loan application processing.

Lenders prefer an applicant with a high CIBIL score because it demonstrates their ability to handle credit well. A low score, on the other hand, indicates a previous instance of loan delay or default.

If your CIBIL score shows you to be a high credit risk, you will be charged a higher interest rate on your personal loan.

How you can use the Personal Loan?

4. Choose Your Lender Carefully

It is very important that you do your homework and compare loans, before you choose your lender. Even if you must choose a lender that specializes in high-risk borrowers due to your poor credit score, you need to be careful. Avoid payday and title loans at all costs. These loans are designed to keep you in permanent debt, with their ridiculously high fees. In fact, avoid any offer that seems too good to be true.

5. Be Careful of Your Debt-To-Income Ratio

Ideally, you should not be spending more than 40% of your income toward EMIs. So, if you earn Rs. 25,000 a month you should not be spending more than Rs. 10,000 for your EMIs. Your monthly debt divided by your gross monthly income is your debt-to-income ratio. You need to keep this as low as possible, meaning do not borrow money unless absolutely necessary. Lenders won’t approve loans that you cannot afford anyway.

Lastly, searching and applying online for a personal loan may ease the process of application and speed up the approval.

The content of this document is meant merely for information purposes. The personal loan features mentioned in this article are subject to updation, completion, revision, verification and the same may change materially based on policy revisions. For more details, please visit our Personal Loan terms and conditions page here.

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