Since a Personal Loan is an unsecured, collateral-free loan, most lenders today typically process and approve Personal Loans within hours. As the borrower, you must comply with the lenders’ prerequisites for loan approval before sending in your loan application. In this article, we have compiled a few Personal Loan tips to increase your chances of seamlessly securing a loan from your lender.
- Maintain a high credit score
Since Personal Loans are unsecured loans, lenders need to assess your credit repayment abilities. They do so by evaluating your credit score and credit history. Your credit history consists of your loan and credit card dues repayment information. If you have paid all your dues on time, you will receive a high credit score, which is the most important determining factor for Personal Loan approvals. A credit score exceeding 750 points is considered a high credit score. It also enables you to negotiate your preferred loan interest rate. - Improve CIBIL score
If you do not have the desired CIBIL or credit score, you do not need to worry. There are several things you can do to improve CIBIL score, and improve your Personal Loan eligibility. For instance, you can reduce unnecessary expenses, and avoid taking on any new debts temporarily. You can also limit your credit utilisation and repay your outstanding credit card dues in full to improve CIBIL scores. - Increase your income
Lenders need to know how you plan to pay them back. A higher income translates to a higher chance of loan approval. You can increase your income by showing your other income sources like incentives for good performance, bonuses, variable pay, income from passive sources such as other investment avenues, etc. All these factors can boost your Personal Loan eligibility considerably. By showing the lender your multiple income sources, apart from your basic monthly income, you can assure them of your loan repayment capabilities. - Reduce debt-to-income ratio
Your debt-to-income ratio is your gross monthly debt divided by your gross monthly income. For instance, let us say you have taken a Car Loan, paying an EMI of ₹13,000 each month from your monthly income or ₹25,000. Here, your debt-to-income ratio would be (13,000)/25,000 = 0.52 = 52%, which implies that your liabilities are higher than your income. You can increase your income to bridge this gap or pay off your existing debts and reduce debt-to-income ratio in the range of 20% to 35% to boost your Personal Loan eligibility.
You can read more on how to calculate your Personal Loan EMI and eligibility by clicking here.
- Opt for a longer tenure
Lenders typically provide extended tenures of up to five years to repay Personal Loans. A longer tenure also results in significantly lower monthly EMIs. Opting for longer loan repayment tenures can solve some of your financial problems since it enables you to repay the loan in budget-friendly instalments at your own pace. Choosing longer repayment tenures and repaying EMIs on time is also a useful way to enhance your Personal Loan eligibility. - Avoid multiple loan applications
When you apply for a loan, the lender accesses your credit report. If you have applied for Personal Loans with multiple lenders, all those lenders would want to access your credit report. Hard enquiries on your credit report make you a high-risk, credit hungry customer. While lenders may reject your Personal Loan application, multiple rejections can negatively impact your high credit scores. Instead of applying for multiple loans, consider applying for the loan with a lender who has an existing banking relationship.
Choose HDFC Bank for your Personal Loan needs
If you are in the market for a Personal Loan, you can take advantage of the paperless Personal Loans from HDFC Bank. Think of pocket-friendly instalments, friendly support just a phone call away and unrivalled flexibility with HDFC Bank Personal Loans.
Looking to apply for a Personal Loan? Click here to get started!
*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Personal Loan at the sole discretion of HDFC Bank limited. Loan disbursal is subject to documentation and verification as per Banks requirement.