Emergencies come in any form and shape. They usually strike when you least expect them. Thus, it is better to remain prepared and have immediate cash to reduce the burden. A Personal Loan is a type of financial assistance offered by multiple banks in India. If you apply for it, you need not submit collateral or security since it is an unsecured borrowing. Applying for a Personal Loan is an attractive financial option for many.
However, it comes with some risks, such as default on the borrowing. Considering this, Personal Loans have stricter eligibility criteria than other borrowing forms. You can follow this simple guide for getting a hassle-free Personal Loan from the bank:
Maintain high credit scores
The credit score is the most important eligibility criterion when applying for Personal Loans. It shows the borrower’s past credit behaviour and how they have paid their dues responsibly. If your credit score is above 750, you are a responsible borrower. High CIBIL scores also mean lower interest rates and reduced risk of lending for banks.
Clear all your dues
Remember to clear all your dues before you apply for Personal Loan. You need to increase the debt-to-income ratio and pay existing bills on time. An ideal ratio is 15% if you have only one liability while applying for the Loan. You can have multiple Loans, but the combined EMI should be less than 50% of your salary.
Include all income sources
Your monthly or annual income shows whether you will be able to repay it on time. Suppose your salary is enough as per a bank’s requirement, it is a good sign. If not, you should include all your other sources of income, like rental, freelance, etc. It shows that you have all the necessary financial resources to help you pay the EMI and increase your Personal Loan eligibility.
Avoid multiple Loan applications
You should avoid applying for multiple Loans as banks raise an inquiry with a credit bureau to assess the default risk. Applying too many times is considered a hard inquiry, leading to negative credit scores. In addition, multiple Loan applications can lead to rejection. You should check your eligibility using the Personal Loan eligibility calculator available on Internet and Mobile Banking applications.
Reduce the Loan amount
If your Loan application has been rejected, you must try to lower the amount. There might be a chance that the bank approves it. Smaller Loan amounts are easy to approve, whereas higher ones require steady income, a high repayment capacity, and an excellent credit score. This way, you can streamline your process of applying for a Personal Loan.
Conclusion
It is advisable never to apply for Personal Loans in a hurry, as they may involve hard enquiries. Instead, you should research well and check the eligibility criteria of each bank to avoid falling into a debt trap and avail of them without any hassles.
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