A personal loan is one of the best options one can avail during a financial crisis.The best personal loans have become the favorite financial tool for the borrowers to fund the need for unexpected expenses like medical bills, unplanned trips, marriage, educational costs and many more. The interest rate or best personal loan rates depends upon the type of personal loan the borrower is applying for.
The best thing about personal loans is that they are unsecured loans which mean the borrower does not have to keep any collateral with the lender to avail the benefits of credit. One can use a personal loan eligibility calculator to check whether they are eligible or not.
Eligibility Criteria for a Personal Loan
To avail the benefits of a personal loan, one must satisfy some eligibility criteria provided by the lender. Given below are some crucial points that every lender considers before sanctioning any loan.
1. Credit Score: Credit score plays a significant role in the determination of eligibility criteria. Credit score can vary from 300 to 900. A credit score of more than 750 is considered healthy and can make you eligible for a personal loan. A good credit score helps to achieve the faster approval on the loan. There are some good places to check credit score online to help make things a bit easy for you.
2. Age: The borrower must be in the age group of 21 to 60 years to avail a personal loan.
3. Income: Monthly income plays a vital role in assessing your ability to repay the loan. The monthly income requirement varies from lender to lender.
4. Existing EMIs: The maximum amount of loan which will be sanctioned will depend upon your monthly expenses and your income. It will help the lender to calculate your ability to repay your loan by comparing your existing EMIs and your monthly income. This will also include your monthly expenses and your credit card payments.
5. Employer’s Reputation: Both salaried and self-employed professionals can avail a personal loan. However, to be assured of timely payments, most of the lenders prefer the employees working in renowned companies.
How one can Improve their Personal Loan Eligibility:
If you are offered a lower amount or higher rate of interest, then given below are some ways through which you can improve your eligibility of a personal loan.
1. Building a high credit score:
A low credit score can lead to instant rejection of your application. Depending on the lender, they can accept the applications of the borrowers having a credit score between low and medium but can charge a higher rate of interest. So it is advised to check your credit score and improve it before applying for a personal loan so that you can show your creditworthiness.
2. Clear existing debts:
An ideal debt to income ratio is 50% if you have a single loan. And if you have taken different loans, then the combined EMIs of different should not exceed 50% of your combined income. If your debt to income ratio is more than 50%, then the lender can hesitate or sometimes unable to sanction any loan to you. So prior to applying for any type loan, it is advisable to pay off your previous debts or reduce the mortgage so that your debt to income ratio is less than 50%.
3. Avoid applying for multiple loans simultaneously:
Various loan applications can indicate various rejections. Every rejection of a loan application can adversely affect your credit score. So to increase the chances of your loan, it is advised to check the lender’s eligibility criteria before applying for a loan. Also, apply with only one lender at a time and wait for their decision. Hence, it is advisable if not necessary don’t apply for the multiple loans, always apply for one loan at time.
The points explained above can help you in improving your chances of getting a personal loan. Once you meet the personal loan eligibility criteria of the lender, submit all the necessary documents to complete the application process. You can easily get approval on your loan application. One can increase the possibility of getting a personal loan by improving one’s credit score and by avoiding multiple loan applications. It is advisable to keep debt to income ratio less than 50%. For getting instant approval on your loan application, always improve your eligibility criteria.