Loans act as a portal to bring us a step close to attain our financial objectives such as owning a property, vehicle, or education. It does have the potential to bail us out of unanticipated financial emergencies like the outbreak of covid-19 induced lockdown that hampered the cash flow, uncertainty in monthly income in the coming generations. As a result, it is crucial for people to know how we can improve the loan eligibility thereby averting rejection of loan applications.
The ongoing lockdown is most likely to have a drastic impact on the processing of the loan and its disbursal owing to limited personnel and working hours. By keeping in mind the below-mentioned tips would help you enhance the chances of getting a personal loan/home loan and car loan.
Keep Track of Credit Score Before Applying for a Personal Loan:-
Your credit score implies your creditworthiness. It is referred to as the capacity of an individual to repay the loan with interest within a given period. Higher your credit score, the better the chances of your approval. Preferably, you should have a credit score of 760 to get approved. If in case you have a lower credit score, the best option is to wait and improve it before approaching a bank. Credit score can be improved by paying off existing debt, clearing the bills on time, and not exceeding the credit card threshold.
- Do not apply for multiple loans:-
It is highly recommended to avoid applying for a loan from various lenders. This might make them feel that you are desperate for credit thereby giving a bad impression that you require multiple loans to cover the expenses.
- Maintain a gap of at least six months between loan applications:-
It is always better to maintain a gap of at least six months between loan applications failing which lender might doubt your ability to repay the loan. If your purpose of availing a personal loan is not very urgent, it is suggested to wait for a few months before applying for the loan because it increases the chance of getting your loan approved.
- Select a lender carefully:-
It is highly recommended to perform comprehensive research and compare loans before choosing a lender. Under any circumstances, try to avoid payday and title loans as such types of loans are meant to keep you in life-long debt. In actuality, avoid those offers that appear too good to be true.
- Pay close attention to the debt-to-income ratio:-
If possible, you should not spend your monthly income exceeding 40% on EMI’s. For example, if you are earning a monthly salary of Rs.25,000, you should not be spending exceeding Rs.10,000. Monthly debt divided by gross monthly income. You should focus on keeping it as low as possible which implies that do not borrow unless it is urgent.
Ways to Increase Home Loan Eligibility
- Choose a longer tenure:-
Once you increase the loan tenure, there is an increase in your home loan eligibility since there exists an impression amongst the lenders that you have ample time to repay the loan
- Prepayment of existing loan:-
Consider clearing any sorts of an existing loan before applying for a fresh home loan failing which the concerned lender might deduct the loan amount at a higher rate of interest
- Improvement of your CIBIL score:-
CIBIL score plays a pivotal role in deciding your loan approval and loan amount. A credit score exceeding 750 is good that enhances your creditworthiness.
- Including an additional source of income:-
Adding another source of income such as part-time business, rental income, rent arising from machinery and equipment gives you the advantage of fetching a higher loan amount.
Below Mentioned is the Home Loan Eligibility Criteria:
|Age of applicant||18 years – 70 years at the time of loan maturity|
|Monthly Salary||Rs.25,000 (minimum)|
|Type of employment||Salaried & Self-employed professionals|
|Credit score||750 and above|
|Years of experience||Min. 2yrs for salaried and Min. 3yrs for self-employed|
|Co-applicant||Not mandatory for salaried and self-employed|
Ways to Increase the Chances of Getting a Car Loan
- Maintain a good credit score:-
Your credit score would determine the sum of money delivered by the concerned lender. Higher the credit score, the better the chances of getting a car loan. The best option is to clear EMI’s without any delay.
- Down payment:-
Offering a lump sum amount as the down payment would help you assist in enhancing your chances of getting a car loan. This is because you had already offered the given majority amount in the form of a down payment and the loan amount is less.
Car Loan Eligibility Criteria:
|The minimum age for loan application||18 years|
|Maximum age at the time of maturity||60 years for salaried and 65 years for self-employed professionals.|
|Net income criteria||10,000 per month|
|Type of employment||Salaried or self-employed|
|Stability||Minimum work experience of 2 years for salaried and 2 yrs in the field of business for self-employed|
|Type of car||The loan amount differs based on the oldness of the car|
|Residence/locality||Urban, rural and semi-urban|
If your credit score is low, it might cost you less to leverage a credit card for a huge purchase rather than applying for a personal loan. On the contrary, if you succeed in achieving a remarkable credit score, it would enhance your creditworthiness.
If possible, you may consider using a bank rate calculator to help you figure out the best way to borrow money, which loan amount you are eligible for, and what would be the estimated EMI. As a result, next time when you approach a banking institution for a loan, you can apply as per your eligibility. Therefore, it is better to work towards the improvement of your credit score that pays off someday.