Personal loans are a popular choice among individuals requiring immediate funding without the necessity of collateral. Given the unsecured nature of these loans, lenders adhere to strict eligibility criteria to mitigate their risk. Let’s delve into some proven ways to enhance your eligibility for personal loans.
Maintaining a good credit score
One of the most crucial factors for personal loan approval is a good credit score. This score reflects your creditworthiness and repayment history, thereby playing a significant role in the lender’s decision-making process. Lenders generally expect a credit score above 750 for approval, although a score of 700 and above can also be considered. To maintain a good credit score, ensure timely repayment of all credit card dues and EMIs and avoid excessive hard inquiries.
Managing debt-to-income ratio
Another vital aspect that lenders consider is the debt-to-income ratio, which is your monthly debt payments divided by your gross monthly income. It’s advisable to keep this ratio low to signify better financial health. A lower ratio can indicate that you are not over-leveraged and are capable of managing your existing debt efficiently.
The FOIR (Fixed Obligation to Income Ratio) is a parameter that lenders look at to gauge your loan repayment ability. It is the proportion of your income already committed to existing EMI payments and other regular expenses. To enhance loan eligibility, aim to keep the FOIR below 40%, ensuring your monthly outgo doesn’t exceed your income
Maintaining job stability
Job stability is another factor that lenders take into account while assessing your personal loan eligibility. A stable job can indicate a steady income source, thereby enhancing your loan repayment capacity. It’s essential to keep a steady job, as it positively affects your eligibility for a personal loan.
Demonstrating additional income sources
Demonstrating additional income sources such as bonuses or investments can further boost your eligibility. It assures the lenders of your repayment capacity, thereby increasing your chances of approval.
Ensuring a healthy financial relationship with lenders
Having a healthy financial relationship with your lender can work in your favor when applying for personal loans. This is particularly true for instant personal loans, where lenders offer loans to low-risk customers with whom they have a positive credit history. In such scenarios, lenders can pre-approve your loan, allowing quick access to funds.