Follow these strategies to get better personal loan and home loan options

If you aim for a more favourable loan amount, whether a personal loan, home loan, or any other loan, there are essential strategies to consider.  

Adhil Shetty, CEO of BankBazaar.com, said, “Formal credit is a great way to achieve your crucial financial goals, such as buying a home, pursuing higher studies or funding your dream car. When you approach a lender for a loan, it assesses you on various parameters, most importantly on how responsible the borrower you are.” 

Thus, implementing the strategies mentioned below allows you to create a more favourable borrowing experience and maximise loan eligibility. 

Improved credit score: A credit score plays an important role in getting a loan. It tells the lender about how responsible you would be in repaying your loan. Therefore, begin by tracking your credit report and credit score. Shetty said, “Obtain a copy of your credit report to check for errors. If there are errors, take steps to correct them. Pay your bills on time to elevate your credit score.” 

For quick approval of a personal loan, one is supposed to maintain a creditworthy CIBIL score between 720 and 750. 

Have a stable income: Lenders also want assurance about the loan repayment capability of a borrower. So, they prefer borrowers with a stable job history and regular income. Lenders may seek documents to verify your employment history of two years or more. So, if you plan on taking a bigger loan, ensure your work and income history does not have too many gaps.  

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Reduce your debt-to-income ratio: When evaluating your loan eligibility, lenders scrutinize your debt-to-income ratio. “If you have multiple loans, try to reduce your debt-to-income ratio. Lowering your debt-to-income ratio makes you appear less risky to lenders. Pay off existing debts or reduce your monthly obligations,” said Shetty. 

Inquire less for loans: Do not submit multiple loan applications, as it makes you appear credit-hungry to lenders. Additionally, each loan application results in a hard enquiry and impacts your credit score. So give yourself time before you apply for a loan if you’ve faced loan rejection recently. 

“If you do not meet the bank’s eligibility criteria, you can have a co-signer with a stronger credit history to increase your chances of loan approval,” said Shetty. 

Establishing a baseline for eligibility for these loans is crucial as it is intrinsically linked to your monthly income and different policies in use by the lenders. While some lenders may insist on a relatively high monthly income to approve your loan, others might be more flexible, even if your income falls below the spectrum.