7 Strategies to Boost Your Personal Loan Eligibility

Despite one’s best efforts to avoid it, a cash crunch can often come unannounced. It may come up as an unexpected medical emergency, an unplanned home or car repair, or even an unavoidable trip. To deal with the expenses that these situations can bring along, it is ideal to opt for a personal loan. 

With an instant personal loan, you can get access to the funds you need, without having to stress your savings. Personal loans are indeed getting popular these days, with RBI data showing that personal loans’ share in overall bank credit grew by 14.4% as of July 2024, totalling around ₹55.3 lakh crore. 

Your chance of securing a personal loan depends on how well you pass the lender’s eligibility criteria. The stronger your eligibility for the loan, the higher your chances of approval and of laying claim to favourable loan terms. With that in mind, here are 7 ways you can boost your personal loan eligibility and secure the funds you need. 

7 Ways You Can Boost Your Personal Loan Eligibility 

While major lenders focus on your credit score, there are other important elements you need to focus on for improving your criteria as well. Here’s a deeper look:

1.Maintain a High Credit Score

Perhaps no other criterion plays as important a role as a credit score does, in your odds of getting a personal loan. A high credit score – that is 750 or above – signals to lenders that you know how to handle your credit and are likely to repay the loan on time.

You can improve your credit score by paying your credit card bills and loan EMIs on time and keeping your credit utilisation ratio low, i.e., not going beyond a certain level of your credit limit. You must also regularly check your credit report in case of any inaccuracies.

2. Clear Existing Debts/Reduce Debt-to-Income Ratio

Before approving your loan, the bank will assess your current debt obligations. No or minimal debt obligation and a high income result in a low debt-to-income ratio, which increases your personal loan eligibility. On the other hand, a high debt-to-income ratio may reduce your loan eligibility, as it indicates limited repayment capacity.

To avoid the latter situation, pay off outstanding debts, such as credit card balances or other loans. Also, avoid applying for multiple loans at once.

3. Choose the Right Loan Amount

Lenders evaluate your income and expenses to ensure you can manage the loan’s repayment comfortably. Hence, applying for a loan amount that’s too high compared to your income may result in rejection.

To help you choose the right loan amount, consider using a personal loan EMI calculator. This tool can help you pick a suitable loan amount by giving you an estimate of what your EMI might be based on the tenure and interest rate. 

4. Show Stable Employment and Income

If you have had a stable job for a considerable amount of time, it shows the lender that you have a steady source of income, which means the lender can be assured of the loan’s repayment to a great extent. Hence, many banks have a stable employment and income record as one of their personal loan eligibility criteria.  

Lenders will usually look for a minimum of 1-2 years of work experience. Proof of steady income through salary slips, Form 16, or bank statements will also be needed. In addition, if you are self-employed, you must show that your business is stable and profitable through bank statements and audited financial statements.

5. Opt for a Longer Repayment Tenure

The longer the repayment tenure, the lower your EMIs will be. Choosing a longer repayment tenure can reduce your monthly EMI, make the personal loan more affordable, and thus boost your eligibility. However, remember that longer tenures may result in higher overall interest payments.

6. Apply with a Co-Applicant or Guarantor

Having a co-applicant or guarantor can enhance your loan eligibility, especially if you have a low credit score or unstable income. For the uninitiated, a co-applicant shares the responsibility for loan repayment and reduces the lender’s risk. A guarantor, on the other hand, is only liable to pay if the main applicant is unable to do so. 

To maximise your eligibility, ensure that the co-applicant or the guarantor also meets the personal loan eligibility criteria set by the bank, such as having a strong credit profile and stable income. 

7. Provide Proper Documentation

Incomplete or incorrect documentation can delay or even result in the bank rejecting your personal loan application. Make sure to provide accurate and up-to-date documents to avoid delays and ensure a smooth approval process. 

Some documents you will need include identity proof (Aadhaar, PAN, passport), KYC documents, income proof (salary slips, IT returns), and bank statements for the last few months.

Along with boosting your eligibility, you must also focus on which lender you choose. Different lenders have varying eligibility criteria, interest rates, and loan terms. Research and select a lender that aligns with your financial profile so that you can have better chances of approval and a more affordable loan.

IndusInd Bank offers attractive interest rates, flexible loan tenures, quick approvals and instant disbursals, to help you have a smooth personal loan journey. And, to add to your seamless journey, you also have a 100% digital application process with minimal  documentation. Flexible tenures and competitive rates make it easier to repay the loan. 

Conclusion

When applying for a loan, worrying about your eligibility is normal. However, if you think you are falling short, you can improve your personal loan eligibility by taking simple steps like managing your credit score, reducing debt, and selecting the right loan terms. By approaching the loan with these tips and considering trustworthy lenders, you can get a personal loan without hassle. Stay on top of your finances, make timely repayments, and enjoy a stress-free borrowing experience.