Are you planning to renovate your kitchen or make a big purchase this festive season? A personal loan can help you cover these additional expenses as it is a viable financing solution to raise funds. Additionally, owing to the ongoing COVID-19 pandemic, you may need a personal loan to meet unexpected expenses at any time. In these uncertain times, personal loans, due to their collateral-free offerings and reduced interest rates, have gained popularity among working professionals.
f you too are contemplating taking a personal loan, then here are six tips to boost your chances of getting approved for this loan.
1. Maintain a Good Credit Score
A credit score determines your financial standing. A healthy score displays a low-risk element and vice versa. Here are some quick tips to maintain a good credit score:
- Ensure that all liabilities are paid in time.
- Clear all outstanding credit card dues.
- Regularly keep a credit score check for personal loan.
- Manage your credit well and keep your credit card usage as minimum as possible.
- Do not apply for too much credit.
You can rebuild your credit history by following the above-mentioned tips. However, it may take some time as negative information such as bankruptcy or late payments, if any, stays for a while in your report. In case you do not have a credit history, create it by taking a credit card and clearing the payments on time.
It would be prudent to adopt healthy financial practices to maintain a good score so that you can negotiate favourable terms.
Also Read: Can a Personal Loan Help You Improve Your Credit Score 2. Mention All Sources of Income
In your application form, do not forget to mention all sources of income as it will determine the risk eligibility. Having more than one source of income will create a positive impact. Lenders also take into account your existing loans and other liabilities before approving. Additionally, your occupation makes a big difference. Applicants who have stable jobs and self-employed professionals such as doctors, chartered accountants, lawyers, and those who are in high demand are usually considered less risky and given priority.
3. Pay Off Your Pending Liabilities
Pending liabilities can be a bottleneck, compelling lenders to reject your application. A poor history of repayment, especially a debt that has remained unpaid for more than seven years, will most likely not make a good impression of your financial health. In short, make your payments upfront and check that you do not have outstanding liabilities.
4. Check Whether You Meet Eligibility Criteria
Personal loan eligibility criteria will differ from one lender to another, hence, make sure you do your homework beforehand. If you are a high-risk applicant, you might be required to disclose the purpose of seeking the loan. Your relationship with the financial institution also makes a huge difference as the lender will prefer a borrower who has shared a positive history with them.
Also Read: How Personal Loans Help During An Emergency
5. Ensure That Documents Are Authentic and in Line with the Application Form
The non-availability of authentic and updated documents can delay the application approval process unnecessarily. Ensure that your documents are in place and in alignment with your application form to avoid any element of confusion.
Typically, the following are the personal loan documents required:
- KYC documents
- Statements
- Income proof: Salary slips or audited financials for salaried and self-employed, respectively
- Income tax returns
- Any other information or document of evidence as required by the lender
6. Find a Lender Who Offers Favourable Terms
The market is filled with both traditional and non-traditional financial institutions that offer loan amounts at varying terms and conditions. However, a lot will depend on the loan amount and the timeframe within which you want the loan disbursed. It is important to do your homework before filling out that application form as it impacts your credit score. Here is how you can find the right lender:
- Check for processing fees and hidden charges.
- Compare interest rates.
- Check foreclosure and penalty clause.
- Check the minimum and maximum loan amount requirements of the selected lender.
Also Read: Tips To Make Your Loan Application A Hassle-Free Process
Additional Ways to Improve Your Personal Loan Application Approval Chances
You can make the process of applying for a personal loan much easier if you follow the advice above. However, some additional recommendations might help you not only get a speedy loan approval but also a
low-interest personal loan.
Maintain Healthy Account Balance
Before you apply for a personal loan, it is important to first run an eye on your bank account balance and transaction pattern. While conducting credit appraisals, financial institutions always consider your average account balance. They also look into the transaction pattern. If the lender discovers that the fund's outflow is significantly higher than the inflows, they will hesitate lending to your profile due to higher involvement of risk. Here are some tips using which you can maintain a healthy account balance.
- The day when your salary arrives in your account, make sure you don't take out all of your money at once.
- Don't make a fraudulent transaction only to show that you have a lot of money in your account.
- Always prepare your monthly budget and withdraw funds accordingly.
Avoid Multiple Applications
Personal loans are known for saving our neck during our tough times. However, one of the common mistakes that we make unintentionally is applying for a personal loan with many financial institutions while dealing with abrupt financial emergencies. You might be surprised to learn that multiple loan applications convey the impression to the lender that you are a desperate borrower while simultaneously lowering your credit score. Apart from that, if the lender rejects your personal loan application, do not file another one with them right away. Try to figure out why you were rejected and work on improving your weak factors.
Also Read: 7 Insightful Self-Employed Personal Loan Tips Go Online
If you are wondering why and how to apply for a personal loan online, keep in mind that the online process helps in speeding up the personal loan application process. When you go online, you may initiate your application from the convenience of your own home with just a few data and documents to share. As soon as your information is saved in the database, financial institutions use AI-based technology to run instant risk profiling. The online risk assessment process takes a few seconds to minutes. Following the successful risk assessment, you will immediately come to know whether or not you are eligible for a loan.
If the lender rejects your personal loan application, you can immediately apply with another lender online. This way, you not only save your time and effort but can also save yourself from making multiple loan applications.
Conclusion
With a large number of financial institutions offering personal loans at attractive interest rates, applying for a personal loan has become much easier, and requires less documentation and disbursal time. Adopting healthy financial practices will help you in the long run and aid you in ensuring that your personal loan application is approved without any hassles.
Disclaimer: This post was first published on 6 November 2020 and has been updated for the latest information, freshness, and accuracy. 
