Personal loans in India are a solution to many problems. Applying for personal loans before a wedding, buying electronics for the house, higher education, etc is very common. These loans do not require any collateral and are, thus, easy to get. However, these do have a higher rate of interest as compared to the secured loans such as car loans and home loans.
Many banks and NBFCs offer lucrative deals on personal loans. Since there is no security collateral involved, these companies check if the applicant meets a few basic requirements before disbursing the loan amount. Monthly income, credit history, employment, age of the applicants and their repayment capacity are a few of the parameters that influence the approval of personal loans.
In the post-COVID world, the regulations have become stringent. A stable income and a job in a reputed organisation will make things easier for the loan applicants. Hence, the first thing that matters while applying for a personal loan in India is the monthly income. You should think about applying for a personal loan only if you have a steady flow of income. Having a consistent income will not only allow you to repay the debts timely but will also improve the chances of getting the loan approved in the first place.
Ways to improve your chances of getting a personal loan approved
Improve your credit score
A decent credit score is a must if you wish for the loan application to be processed in one go. Most lenders require a credit score of 750 or above for processing personal loans in India. Your credit score is a measurement of your repayment capacity. This score is largely affected by your past credit history and defaults. Therefore, it is imperative that you check the credit score before filling a loan application. You will have to pay a nominal amount to download the credit report online.
Check your credit report for any negative remarks such as missed payments. Fix these by taking the necessary measures. If you are behind on loan or credit card repayments, now is the time to fix these. All these negatively impact your credit score and may affect your chances of getting a loan.
Calculate existing debts
It is advisable to calculate the sum of outstanding debts before applying for a personal loan. Also, calculate the total of EMIs (if any). This will give you a fair idea of the amount that you will be left with to meet your monthly expenses.
Having other loans/credit card EMIs does not mean that you are not eligible for a loan. However, a high debt-to-income ratio can decrease the chances. Paying off previous loans before you apply for a new one will improve the chances of success. Also, avoid filling multiple loan applications simultaneously. This may affect your financial situation negatively and also decrease the chances of getting the loan approved.
Another important factor here is credit card debts. Do not max out on your credit card limits. It reflects negatively on your credit score by raising the credit utilisation ratio. It is advisable to lower your credit card limits to an amount that you can pay off easily every month.
Choosing the lender
Many companies offer personal loans, some of them offer the lowest interest rates. However, the decision to choose the lender should be well-researched and thought after. Compare the quotations from different banks/NBFCs.
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Read the terms of loans each of them offers. The terms for foreclosure or floating rates of interest can be deal-breakers. Other important factors that you must consider while choosing the lender is the processing time, disbursal time and the documentation required. After all, a hassle-free experience is what everyone wants while applying for a personal loan in India.
Summary
Rejection of the loan application does not mean that you cannot apply for it again. However, you must wait at least four to six months before filing a new application. During this time, you must try and fix the errors that led to the rejection of the previous application. Check the personal eligibility again after rectifying the errors. Turning the reds to greens with the lender will help increase your chances of success.
