5 Eligibility Factors that can Affect Your Personal Loan Application
Today, one can apply for an online or instant personal loan in a few fast and easy steps since these loans are free of collateral. If you meet the personal loan eligibility criteria, the instant loan could be disbursed within minutes. Therefore, such loans can be most useful in the case of unforeseen events or unplanned expenses.
Nonetheless, it’s essential to remember five factors of the eligibility criteria so your loan application is not turned down. Meeting these criteria could also ensure you are given the online personal loan on relatively favourable terms.
1. Check your Debt-to-Income Ratio
Make sure you repay all your existing debts, including credit card bills, before applying for an instant personal loan. In other words, you need to reduce the debt-to-income ratio because lenders may be reluctant to lend if multiple financial obligations exist that affect your repayment capacity. This ratio can be calculated by dividing the total debt by your income. It’s imperative to ensure this value remains under 50% since a higher percentage denotes a greater risk of default. Generally, the total EMIs you presently pay must not exceed 30 or 40% of the monthly income. If this is not the case, prepay some of your debt before applying for a personal loan.
2. Improve and Maintain a Healthy Credit Score
A healthy credit score is crucial because personal loans being unsecured, lenders will use this to gauge your repayment capacity or creditworthiness. Typically, a credit score of 725 and above indicates you are a responsible borrower while 800-plus is excellent, indicating a person is a safe borrower. A score of under 725 would indicate you lack a clean repayment history. As a result, you will be classified as a high-risk borrower and your loan application could be quickly rejected. Although select lenders may still advance you an online personal loan, note that you will be charged a much higher interest rate to partly offset the default risk. Most lenders rely on CIBIL scores that range between 300 and 900 points. Ascertain you have a healthy credit score before opting for a personal loan. You can do this by making it a point to check credit scores periodically.
3. Include all Sources of Income
Lenders check your monthly income to understand the repayment capacity. Given this, it is important to mention all sources of monthly income, not just the salary income. These could include part-time income, rental income or that from any other source. Unlike home, car or gold loans, which are supported or secured by some collateral, personal loans are unsecured. Therefore, lenders need to be reassured about your capacity to make timely repayments.
4. Avoid Applying Simultaneously for Multiple Loans
If you apply for multiple loans during the same period, it will raise red flags among lenders about your financial situation. Whenever you apply for any loan, including personal loans, the lender will resort to hard inquiries with credit bureaus to estimate the risk of default. Multiple loan applications will result in numerous hard inquiries from lenders on your credit report. Consequently, this will reduce your credit score since you will be viewed as a credit-hungry customer. Lenders will then reject the loan application. Checking your credit score regularly will help you avoid such pitfalls.
5. Choose a lender with Suitable Eligibility Criteria
Don’t apply randomly to multiple lenders hoping one will approve your loan. Remember that different personal loan lenders require fulfilling various kinds of eligibility criteria. It’s best to check your personal loan eligibility criteria vis-à-vis each lender beforehand and identify the one that suits you the most.
For example, Clix Capital has eligibility criteria that are comparatively easier to fulfil: the applicant must be between 25 and 58 years old; have a minimum monthly income of Rs. 25,000; be working with the present employer for the past six months at least; and possess work experience in the current field for at least 12 months. If these conditions are fulfilled, simply have your essential documents verified online and the loan application process could be completed speedily.
In essence, understanding the requirements before applying for a loan maximises your chances of approval. Additionally, you could be offered a more favourable interest rate and easier terms if you meet the eligibility norms.
About Clix Capital
Clix Capital is a new age NBFC revolutionizing the lending space by offering differentiated digital lending products that are driven by technology and deep analytics. It offers a range of lending products to a varied spectrum of customers across the MSME and consumer segment, including personal loans, MSME loans, healthcare loans, and mortgage finance.
Clix is co-founded by industry veterans Mr. Pramod Bhasin and Mr. Anil Chawla and is backed by a private equity fund AION Capital Partners Limited (an affiliate of Apollo Global Management, LLC – one of the largest alternate investment managers globally with AUM of $433 billion). Mr. Bhasin is the Founder of Genpact and the former CEO of GE Capital India and Asia; and Mr. Chawla has been the former CEO of GE Capital India and Asia’s Commercial Finance Business.
Together Mr. Bhasin, Mr. Chawla and AION jointly acquired the commercial lending and leasing business of GE Capital India in September 2016 and rechristened it Clix Capital.
For more information, please visit www.clix.capital.