There are many reasons why you could opt for personal loans. It could be for a family vacation, renovating your house, medical emergencies, or debt consolidation. But, before you go ahead and send in your application, you should know that being an unsecured loan, personal loans come with various terms and conditions that can prove to be a pro and a con for you.
Sometimes it happens that the borrowers won’t be able to fulfill all the eligibility criteria of personal loan hence, unable to get the approval for the loan. In that case before applying for the instant personal loan online the borrowers must have the knowledge of the factors which helps to improve the chance of getting approval. Here is a list of a few factors which help to get the definite approval on the loan.
There are however a few simple things you can do to prove that you meet all their requirements.
List Of A Few Factors That Increase The Chance Of Getting Instant Loan Online:
- Maintain a high credit score:
A good credit rating is the first important things lenders look for before granting a loan to borrowers. Getting an instant personal loan online can get easier if you have a high credit score, meaning a score above 750. To maintain a score this high, make sure you don’t default on prior loan instalments, pay credit card bills on time, and keep your credit dues clear as and when they are due. The higher your credit score, the better your chances of getting an instant personal loan.
- Borrow as much as you need:
While it is always smart to keep a buffer, this is not true for personal loans. Sit down and detail out what you need the loan for, how much it will cost, and then borrow exactly that amount. Availing a higher amount increases your EMI amount, including the payable interest, which piles on the financial burden on you. Failure to pay this can result in penalties from the lender and/or drop in credit scores, hurting your chances to get a loan in the future.
- Limit your existing debts:
Debt to Income (DTI) ratio is your monthly EMI or debt divided by your gross monthly income. It is a measure of how much you can afford to borrow over a given period. A widely accepted estimate is that you should not spend more than 40% of your monthly income paying off loans but some lenders do go upto 65% while considering the loan amount. Lenders will always double-check to see if you have the capacity to repay them.
- Have a steady income:
A steady income ensures that you can meet all your EMI deadlines, and not default on any payment to be made to the lender. Of course, this does not mean you need an office job to apply for a loan. Try to keep your work situation steady in a month before you apply for the loan; this paints your picture as a responsible borrower for the lender. It also shows that you have the means and funds needed to repay what you might owe.
- Keep your loan tenure shorter:
Most borrowers believe that opting for longer repayment tenures will benefit them as it leads to lower EMI amounts, making it affordable. But what is generally overlooked is that longer tenures also makes you pay more in terms of interest charges. Very short tenures mean an automatic spike in your EMI amount. So, you need to look for the right balance in terms of tenure and the interest payable so that there is no pressure on you while you enjoy the money you have been given.
- Avoid multiple loan applications:
Making multiple loan applications to lenders in hopes that one will get accepted can work negatively for you. This makes you look greedy for credit and makes lenders doubt your financial capabilities to repay a loan, should it be granted. Also, too many hard inquiries about lenders and their loan terms can cause your credit score to drop. Hence, it is advisable to avoid applying for multiple loan applications.
- Consider getting a cosigner:
If, for any reason, you are unable to meet the eligibility criteria to qualify for a personal loan on your own, think about asking someone with a higher income or better credit to cosign for you. Cosigned loans are less risky for lenders which makes it easier for you to get it approved. But, cosigning is a big risk for someone who guarantees the loan, so be sure to ask only someone close to you.
- Research your lenders well:
As we know that Different lenders search for different audiences. Some cater to only those who are most qualified with the high credit scores. Others advertise that credit reports are not the only thing they look for, which means they might wish to lend to you even if your credit isn’t good and perfect.
Be sure you read the online reviews and also check the lenders’ websites to see what the requirements for the approval of the loan & how selective the lenders in granting the loans to borrowers. Every borrower can find a good lender who is right for them. The only required thing is to just make an approach for it.
While all these tips can help you improve your chances of securing the personal loan you desire, you must make sure that you meet the lender’s eligibility criteria. More importantly, you must make sure to choose a trusted lender and on the right platform.