One can never be sure of when they might face an emergency where they suddenly find themselves in need of funds. Now, some might not prefer using a sizeable amount of their savings to take care of the expense at hand. In such cases, one good option is to apply for a personal loan. This loan can offer the financial support needed, and borrowers can repay the loan in instalments over a period of time. While an instant personal loan can turn out to be very helpful, one still has to keep in mind that there are certain personal loan eligibility requirements that lenders have before they accept loan applications. One of the most important factors that lenders evaluate is an applicant’s credit score.x
Now, what if the applicant does not have a great credit score? Do they not qualify for a personal loan? While it is better to have a decent credit record before applying for a loan, there are a few ways in which an applicant with a low credit record can improve their chances of the lender approving their application. Read on to find out how!
Apply for a personal loan with a guarantor
It is quite common for financial institutions to ask for a guarantor before approving a personal loan application. For those who are not familiar with a guarantor, they are a witness to prove the authenticity of the borrower. They guarantee that the loan taken will be repaid. This means that if the borrower fails to repay the loan, the guarantor is responsible for covering the loan’s EMI payments.
Maintain a steady source of income
Any lender would want to make sure that the applicant can repay the loan without any financial difficulties. This is why it always helps to have a steady source of income, as this can help improve the lender’s trust when it comes to the applicant comfortably clearing their personal loan EMI payments.
Avoid applying for a high loan amount
If an applicant has a low credit score, it is quite difficult for any financial institution to offer them a high loan amount. To improve the chances of a personal loan approval, it would help such applicants to apply for a smaller loan amount.
Clear any existing debt
It is never a good idea to already be paying off EMIs of existing loans while applying for a new personal loan. Lenders take into consideration the applicant’s ability to pay off the loan, and if they are already occupied with multiple loan payments, this reduces their chances of a loan approval.
These are a few ways in which an applicant can improve their chances of getting the loan. Do note that there are ways in which one can improve their credit score too. These include clearing any outstanding dues on credit cards, not having multiple loan applications, and paying back bills on time without any delays. Applicants with a decent personal loan CIBIL score can get numerous benefits such as a lower personal loan interest rate, higher loan amount, and even a quicker approval.
What did we learn?