Personal loan is one of the most preferred loan selections for these in need to have of speedy funds. However, its unsecured nature leads lenders to adopt a cautious strategy though evaluating loan applications. This can lead to the rejection of private loan applications.
Here are some of the critical aspects that lenders look at though evaluating the private loan eligibility:
Credit profile: Credit score is one of the initially filters factored in by the lenders though evaluating a private loan application. Generally, applicants with a credit score of 750 and above have a tendency to have a greater likelihood of loan approval as they are deemed to be more disciplined and therefore, carry reduced credit threat for the lenders. Some lenders also provide preferential interest prices to private loan applicants obtaining a greater credit score. Those with a poor credit score either face rejection or are levied greater interest prices to make up for greater credit threat for the lender.
Make certain you construct and keep a sturdy credit score to increase the private loan eligibility. Follow healthful credit practices like timely repayment of EMIs and credit card bills, restricting credit utilization ratio inside 30%, monitoring assured or co-signed loan accounts, avoiding many loan or credit card applications inside a brief span and sustaining a healthful credit mix to construct and keep a sturdy credit score.
Develop the habit of reviewing your credit report at frequent intervals, ideally at least when in every single 3 months. This will enable you enough time to make corrective efforts, if expected, to strengthen your credit score. This will also enable you to spot incorrect data or clerical errors pulling down your credit score and report them to the concerned bureau or lender for rectification. A rectified credit report will automatically enhance your credit score. You can fetch one cost-free credit report every single year from every of the credit bureaus. Alternatively, you can also fetch cost-free credit reports along with their cost-free month-to-month updates from on-line economic marketplaces.
Existing consumer partnership with banks and NBFCs: Scores of banks and NBFCs provide private loans, with interest prices ranging about 10%-24% p.a. Many lenders also provide pre-authorized private loans at preferential interest prices to the current prospects. Existing relationships can be in varying types, such as existing, savings, salary or fixed/recurring deposit accounts, current loans or credit cards.
Those seeking to avail a private loan must initially get in touch with bank and/or NBFCs with whom they share an current banking and/or lending partnership. Interest price and other loan capabilities supplied by them can be applied as a benchmark to evaluate interest prices supplied by other lenders. Also, check out on-line economic marketplaces to evaluate private loans supplied by other lenders based on your credit score, earnings, employer’s profile, job profile, and so forth.
EMI affordability: Similar to all loan sorts, lenders aspect in the repayment capacity of a private loan applicant though evaluating loan applications. Lenders ordinarily call for the month-to-month loan repayment obligations (such as the EMI for the new loan) to be inside 50% of net month-to-month earnings. Those with greater repayment obligations ordinarily have reduced probabilities of private loan approval. Such applicants must opt for a longer tenure as undertaking so would lower the EMI outgo and thereby, enhance EMI affordability and loan eligibility.
Employment profile: Another eligibility criterion factored in by lenders prior to approving private loan applications is the employment profile of the applicant. Some lenders also look at employment profile though setting the interest prices.
Generally, lenders have a tendency to choose lending to salaried workers more than non-salaried ones due to greater earnings certainty of the former. Amongst the salaried private loan applicants, these working with the public sector or reputed corporates are preferred more than other folks. In case of non-salaried applicants, experts such as chartered accountants and physicians have a tendency to have greater probabilities of getting approval on their private loan applications.
(By Gaurav Aggarwal, Director & Head of Unsecured Loans, Paisabazaar.com)