Financial institutions have simplified household funding with the introduction of advances like personal loans. These loans are quickly available at short notice and are can be secured at affordable rates of interest. The features that lenders provide on these advances are useful for the borrower too. And help with easy loan management over the available tenure.
Their unsecured nature, however, makes these financing options a high-risk lending option for financial institutions. Which keeps the fulfilment of eligibility requirements a must for any borrower. Accordingly, one must also complete their personal loan application accurately. So that any possible hassles related to financing are eliminated.
When applying for a personal loan, one must be well aware of all the requirements. He/she would need to meet for easy approval and disbursal of the advance. Let’s check out all essential details related to the advance. You should be prepared with when applying for financing to improve your chances of easy approval.
Eligibility Requirements for Personal Loan
As high-risk, unsecured financing options, personal loans require individuals to meet certain specified mandatory requirements. The factors so qualifying for one’s eligibility and their borrowing profile suitability, and their requirements include the following score.
- Credit score: It is a 3-digit number that should be not less than 700 for individuals sending their personal loan applications.
- Occupation: Individuals, whether salaried or self-employed, both can apply for a personal loan with other eligibility factors intact.
- Income: Income requirements for applicants differ from one person to another and are also based on the city one resides in.
- Financial stability: Based on whether you are salaried or self-employed, you must hold a decent financial stability, based on income source. For self-employed applicants, a business vintage of at least 3 years is mandatory with a minimum of 1 year in the current operation. Salaried individuals must also complete a total work experience of at least 1 year, with a minimum of 6 months in the current business one is operating in.
- Residential stability: All Indians must be residing citizens of India to complete their personal loan applications without any hassle.
While these personal loan eligibility criteria are mandatory, one can further improve their eligibility for the advance through a few tips and tricks in place. Below mentioned are some of them.
Work on your credit score improvement at least 6 months prior to applying
A credit score of an individual is derived through his/her credit history created over the time to record past credit behaviour. However, any efforts taken to improve on your credit score must be taken at least 6 months before you send your personal loan application as it takes as much time to reflect any related changes on the score.
Repay all existing dues if possible
If any lump sum funding is available, you can utilise it to make repayments of any previous loans or advances running in your name. It will push up your maximum loan eligibility, allowing the lender to easily understand if a new personal loan can be accommodated in the funding or not.
Complete timely repayment of any running advance
If you are servicing any EMIs, you must also make sure that you pay the EMIs on or before the due date every month, including credit card bills. It helps create a reliable financial profile so that the lender does not hesitate from extending the required funding to you.
Always pay EMIs in full
Apart from making timely EMI payments, you must also pay them in full. As it is another indicator of an individual’s reliable financial discipline followed. And allows the lender to approve your personal loan application without any hesitation.
Prepay your loans for early repayment
If you are servicing any loan or advance, you can choose to prepay it before availing a new personal loan. Doing so shall free up sufficient space in your monthly income to accommodate a new loan EMI. Prepayment also helps create a positive impression on the lender regarding your financial profile.
Not to mention, prepayment always helps enhance overall savings on any loan. So, you may always cross-check the interest saved with the cost incurred and decide for your loan affordability.
Keep credit utilisation ratio under 30%
You may have access to financing of high value, which helps meet several of your financing needs with ease. However, it is not a wise idea to use more than 30% of how much funding is available to you. This is because anything more than 30% indicates high credit dependency. Thus portraying the borrower as a risky borrower, creating hassles with personal loan approval.
When looking forward to enhance your eligibility for your personal loan application, you can also choose to apply for a loan lower than your maximum eligibility. Use a personal loan eligibility calculator to assess your maximum loan availability, and apply accordingly.