Personal loans are a great credit instrument if you are looking to avail urgent funds. Easy eligibility criteria, simple application process, minimal documentation and flexible repayment options are some of the major benefits of availing a personal loan with leading financial institutions. Since the loan amount can be used for various purposes, personal loans are one of the most preferred financing options in times of emergencies. Nowadays, you can avail an instant personal loan online from the comfort of your home. However, you must make a note of certain aspects to ensure that your loan application is not rejected by the lender. Therefore, let us have a look at a few aspects that can affect your personal loan eligibility.
Not being aware of your credit score:
Your credit score plays a crucial role in determining your loan eligibility. Therefore, it is essential that you check your credit score before applying for a personal loan. You can check your credit score by visiting the CIBIL’s official website. Having an idea of your CIBIL score can give you fair understanding regarding whether your loan application will be accepted or not. A high credit score can increase your personal loan eligibility significantly. Therefore, you must work towards improving your credit score before applying for a loan. You can improve your credit score by clearing outstanding dues and making timely repayment of your existing loans.
Not checking your loan eligibility:
The personal loan eligibility criteria may differ from one financial institution to another. It is advisable that you compare various lenders before choosing the right lender for yourself. Also, check whether you satisfy the eligibility criteria set by that lender. You can check your loan eligibility by using an online loan eligibility calculator. This will give you a fair idea of whether your loan application will be accepted or not. Checking your loan eligibility beforehand will reduce the chances of rejection of your loan application.
Not keeping a track of credit utilization ratio
Credit utilization ratio is the ratio of the amount of debt you owe on your revolving credit accounts to the total credit available. If you have a high credit utilization ratio, it can affect your credit score significantly. Therefore, you must always keep a track of your credit utilization ratio and try to minimize it. Make sure that you do not over-utilize your credit card and use it wisely. This will help you boost your credit score and increase the chances of availing a personal loan.
Making multiple loan applications
Applying for multiple loans frequently or taking multiple credit cards can affect your chances of availing a new loan. This is because financial institutions make a hard check of your credit score when you apply for a personal loan, and this hampers your credit score negatively. Also, if you already have multiple outstanding dues to repay, the lender may consider you as a high risk borrower and hesitate in approving your loan application.
Not comparing various lenders
Since the interest rate on personal loans may vary from one lender to another. It is advisable that you compare various lenders before making a loan application. This will help you avail a loan that best suits your needs. Not comparing the financial institutions and applying for a personal without researching the lender can affect your loan eligibility. Therefore, it is also essential that you learn the terms and conditions of various lenders before making the final decision of applying for a personal loan.
Now that you have a better understanding of various factors that can affect your personal loan eligibility, make sure that you keep them in mind before applying for a loan. Also, once you avail the loan, it should be your prime responsibility to repay the loan within the stipulated time. If you have any queries while applying for a personal loan, you must seek the help of a financial advisor. This will help you make a well-informed decision.