Emergencies are usually unannounced in nature and if you are not prepared, it can hamper your cash flow or at worse, lead to an irreversible damage to your financial stability. In such situations, a personal loan comes in handy. With no restriction, zero collateral and quick processing features, personal loan can be advantageous for mitigating your monetary shortfalls. However, before you apply for personal loan, you must check if you meet the lender’s personal loan eligibility criteria. Doing so would assist you to know your chances of availing the loan.
As the need for personal loan may come up any time on witnessing financial emergencies, it is important to practice healthy credit habits to hold higher personal loan approval chances. Here is how you can enhance your personal loan eligibility:
- Evaluate credit report at periodic intervals
Usually, loan seekers with higher credit score i.e., of 750 and above can avail personal loan at lower rate than those with lower score. Given the requirement for personal loan generally is unannounced in nature, checking the score just before personal loan application might not be of any help. Forming an excellent credit score takes a lot of time and periodical credit report review is the only medium to keep thorough check on credit discrepancies and behavior. Doing this would even give you sufficient time to take right steps to correct errors and thereby enhance your personal loan eligibility.
- Clear all dues on time
Of all the factors, your capacity to repay is believed to receive the highest weightage by credit bureaus when computing your credit score. Any default or delay in repaying the loan EMI or credit card dues not only attract penalties, but also pull down your credit score by some points. And a reduced credit score can massively dampen your personal loan eligibility criteria set by lenders. Thus, ensure to repay your dues by due date and in full because it can result in a steady enhancement in your score.
- Do not enquire with various lenders within a short time-period
Each time you apply for personal loan, lenders raise an inquiry with the credit bureau to review your default risk. Each of these inquiries is addressed as a hard inquiry. On receiving such inquiries, credit bureaus lower your credit score by a few points. Multiple such inquiries in a short period of time can be disastrous as it may not just reduce your score by a huge margin but even lower your personal loan approval chances. In place of submitting personal loan inquiries directly to lenders, approach online financial markets to strike comparison and select the most suitable lender according to your eligibility and financial requirement. Initiation of credit report inquiries by such online portals are called soft inquiries, which do not have any impact on your score.
- Review your EMI affordability
Before you apply for a personal loan, evaluate your EMI affordability by reducing your insurance premium, monthly mandatory expenditures, existing EMIs, crucial contribution towards financial goals etc. from your monthly income. Remember that most financial institutions prefer overall EMIs, involving your new EMI for personal loan to be within 60% of your monthly income. Once you are aware about your EMI affordability, choose the shortest tenure to reduce your overall interest outgo. While you do so, avoid compromising your monthly contributions towards financial goals to opt for higher EMIs because it can negatively impact your future financial goals.
Personal loan, by far, is one of the prudent credit options for availing loans to meet personal requirements of any kind. As such loans are disbursed within 2-7 days of loan application submission, instant personal loan i.e., pre-approved personal loans can be considered at times of immediate fund requirements. This is because instant personal loans owing to their pre-approved nature allows loan disbursal on the same day of loan application submission. However, instant personal loan interest rate is higher than regular personal loans. Thus, if your need is not immediate, you should consider waiting for approval and disbursal of a regular personal loan instead of instant personal loan.