Tips to increase personal loan eligibility

Posted by Arwind Sharma
July 31, 2017

Self-Published

Thinking of applying for a personal loan? You should consider the eligibility criteria for personal loans before applying. There are several cases where people wish to partake of the benefits of personal loans but find their lenders unwilling to lend their desired amounts. Loan eligibility is dependent on several factors. The direct factors influencing loan eligibility are in your own hands but there are a few indirect aspects as well.

These include the importance given by your lender to the company that you work for. If you are working in a sector with high risks like a startup/e-commerce company, it will automatically affect your loan eligibility. Another indirect factor is the number of dependents that you have. Your personal loan eligibility will be negatively impacted in case you have more dependents.

A wise decision is to use an online eligibility calculator before zeroing in on your desired personal loan amount. This will help you know the amount that you are eligible for and you can also calculate the EMI accordingly. Here are some other tips to increase your personal loan eligibility:

  • Selecting the bank/NBFC- Go for a financial institution where you already have an existing relationship. If you have paid all your EMIs on time for another loan with the same lender, your personal loan application will be favorably perceived and your eligibility may be higher in this case. If you are a salaried employee, try availing of a personal loan from the financial institution where you have your salary account. Small private banks and NBFCs are more flexible and liberal when it comes to determining personal loan eligibility as compared to big private banks and public sector banks.
  • CIBIL Score- A high CIBIL score automatically equates to higher chances of getting your personal loan approved along with higher eligibility. The point to keep in mind here is that credit scores of borrowers vary across 4 credit bureaus. Find out your credit score with all the bureaus and apply to the financial institution that refers to the credit bureau where you have your highest score.
  • Purpose of the Loan- In most cases, the lender will ask you about the purpose of the personal loan. The eligibility is dependent on the purpose of the loan. In case you are taking a personal loan for a foreign trip and the like, your eligibility may be low while if you are taking a loan for home repair or a wedding, there is a chance of higher eligibility. You should always have a genuine reason and should share details on why you need a personal loan. You should also be an actual borrower. If you are borrowing for someone then the possibilities of rejection are high.
  • Unsecured Loans- Since personal loans are unsecured loans (they do not require any collateral), maximum weightage is provided to any running unsecured loans that you have along with your income while fixing eligibility. In case you have unsecured loans, try and close these loans before applying for a personal loan. In case you already have a home loan, you should expect lower personal loan eligibility since home loans utilize close to 100% of credit eligibility and scale up the ratio of EMI to net take-home salary. A personal loan may well be rejected in case the borrower is already servicing a home loan.
  • Income- You should always review your net salary before applying for a personal loan. Keep aside the perquisites and allowances to get the net take-home salary. The net salary is only considered while fixing personal loan eligibility. Suppose your post-tax salary including perquisites and allowances is around Rs.1.5 lakh every month and your net salary is Rs.90,000 per month. The eligibility for a personal loan will be calculated only on the Rs.90,000. In case you merge the allowances and perquisites with the basic salary, the tax burden will increase even if the personal loan eligibility goes up.

Always remember that proper planning is important before applying for any loan. Always have a back-up plan ready in case your personal loan application is rejected or the sanctioned amount is lower than what you need. This plan is to get a loan against a credit card or similar measures to raise the necessary funds.

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