Getting an approval on loan application may not be a cake-walk anymore. Lenders are adopting stricter criteria for approvals in the current economic troubles brought-in by the pandemic. Contrary to this, the financial needs of people are increasing.
The need for additional funds may be brought on by anything; you might be in the need to pay for your children's academic fees, urgent house or property repair, need to consolidate debts, vehicle or equipment purchases, etc. In some of these situations, funds may be needed urgently, but the lenders might reject your application for any reason.
Here are a few pointers on how to ensure that your loan application is approved quickly.
Do not apply for a loan without checking the eligibility criteria of the lender thoroughly.
It is necessary to go through the eligibility criteria before the loan application. Sometimes, the lender might have criteria that you may not fit into; in such a scenario, there are chances that your loan will get rejected. This will actually harm your credit standing as each application is treated as a loan inquiry and recorded in your credit report. This will lower your credit score that can prove to be a hurdle for future loan approvals.
Check the Experian credit score before applying for a loan.
The Experian credit score is a three-digit value ranging from 300 to 900, which depicts your creditworthiness based on your income, assets, previous loans, repayment behaviors, etc. Every lender has different criteria for credit score. Thus, it is necessary to go through your credit score before applying for a loan. A credit score of above 700 is considered good, and generally, all the lenders accept this score.
Do not file loan applications with multiple lenders at the same time.
Every lender can come to know about your current loan application. If you have applied for multiple loans, you will leave the impression that you lack confidence and the ability to repay the loan. Additionally, multiple applications will increase the chances of multiple rejections. This can affect your credit score that defines your creditworthiness. Hence, research about different money lenders in the market, their eligibility criteria, interest rates, loan application procedures, and terms and conditions of repayment. Finally, send out a loan application to the lender that suits best to your requirements and eligibility.
Correct the errors present in your credit report
You can always view your Experian credit report without a cost, once a year. You can always pay for the credit information report. The report can have errors and misses. Try addressing these errors by taking the right action to improve your creditworthiness. The smaller the number of mistakes in the credit report, the more are the chances of personal loan approval.
Avoid reapplying for a loan before six months of rejection.
If your loan application is rejected, do not apply for another loan immediately if you are short on eligibility. Instead, if time permits, spend at least six months working on improving your credit score and history. Proper research on the lenders' eligibility criteria will lead you to a path of improving your creditworthiness and being eligible for the funds you need.
Suppose you file a loan application shortly after the rejection without proper research or building your eligibility, it will lead to a further drop in your credit score. This can eventually affect the status of all the subsequent loans that you apply for.
Repay your previous debts before applying for a new personal loan
Recurring pending debts lower your credit score directly. So, it is advisable to repay all the debts, be it in the form of pending secured or unsecured loan repayments, outstanding bills, etc. before applying for a new loan. Clearing your debts will increase the chances of getting the loan approved. Repay your debts on time according to the terms and conditions of the lenders. This will increase the probability of future loan approval.
Plan for repayment before applying
Avoid skipping this step before applying for any loan. Do not apply for a loan with interest rates and EMI that may be unmanageable and add pressure on your cash flow. If you miss on any payments, it will further affect your credit history. Any delay in the repayments can lead to negative effects on your profile as a borrower. This can, in turn, lead to the rejection of any loan applications that you make in the future to meet your financial needs.
Avoid making errors in the loan application.
Mention correct personal details and provide all the documents as required or requested in the personal loan application before submitting it to the lender. If the lender finds any missing or incorrect information, they might reject your loan application. Thus, do not hurry while filling the application form as the rejection of one loan can also prove to be a hurdle for the approval of other loans in the future.
Provide correct information about your income and expenses
Do not hide your income and expenses while filling a loan application. Remember that the lender can access your bank transaction, previously availed loans, assets, IT returns, etc. through your credit profile. Further, every document that you upload has specific signs and symbols for originality that the lenders can identify quickly. Any incorrect information and uploading of duplicate papers will lead to the rejection of your application.
Select the loan specifications such that the EMI does not exceed 30% of your monthly income
Lenders always judge the repayment capacity of applicants before approving the loan. Ensure that the EMIs of your pending and new loans, do not exceed 30% of your income. For example, if you have a monthly income of Rs. 90,000, then opt for the EMIs that do not add to more than Rs. 27,000. This is an important tip to get your personal loan approved.
Conclusion
Although personal loans are your assistants in financial emergencies, you must consider every aspect before applying or availing a loan. Follow the tips as mentioned above mentioned to ensure that your application is approved in one go.
Most importantly, never be in a hurry while applying for a personal loan.
Read through the terms and conditions and every minute detail of the loan agreement carefully. This will help you make an informed choice and decision and help you increase the chances of approval.
