Personal loans don’t require any collateral since they are unsecured. Hence, banks have to rely on other factors like your credit score, income, occupation details, debt-to-income ratio, and employment stability to determine your eligibility. Put simply, your approval and the loan amount you qualify for depend on how you meet these criteria.
So, how can you show banks that you are a less risky borrower and increase your probability of getting a personal loan? Here are some valuable tips and strategies you can consider.
1. Choose the right bank with easy eligibility criteria
Compare your options and choose a bank that is known for its easy eligibility criteria. For example, IndusInd Bank Instant Personal Loan has simple eligibility criteria and a 100% digital application process. You can complete the entire loan process from the comfort of your home. Look at the additional advantages you get:
| Competitive rates | Get an affordable interest rate on personal loans and manage your Equated Monthly Instalments (EMIs) comfortably. |
| Higher loan amount | Borrow any amount between ₹30,000 and ₹5 lakh. |
| Manageable tenure | Choose a flexible repayment tenure, ranging from 1 to 4 years. |
| Application process | Enjoy quick loans through a completely online and paperless process. |
| Fast disbursals | Benefit from an easy application process, quick approval, and speedy disbursal. |
Apply for a personal loan online and get started with IndusInd Bank today!
2. Maintain a good CIBIL score
Your CIBIL score, a number between 300 and 900, reflects your credit history and financial behaviour. The higher your CIBIL score, the better your chances of personal loan approval. You can increase your CIBIL score by adopting healthy financial habits like:
- Paying all your EMIs and credit card dues on time.
- Avoid maxing out your credit limit.
- Maintaining a healthy balance of secured and unsecured loans.
- Keeping your credit report is error-free.
3. Borrow what you can comfortably repay
Higher loan amounts give you more purchasing power to finance large purchases. However, they pose a greater risk to banks, especially if you have a low credit score, a high debt-to-income ratio, or a relatively low income.
It is wise to use a personal loan calculator to know the exact EMIs you will have to pay on your loan. Enter the loan amount, interest rate, and repayment duration to check your monthly obligations. If the EMI seems too high, adjust the loan amount accordingly to fit your budget. You can use this tool to find an ideal balance between the loan amount you need and the EMIs you can afford without difficulty.
4. Add a co-applicant (co-signer)
A co-applicant with a higher income or strong credit score can improve the overall credit profile and boost the probability of loan approval. This is because the joint income is taken into consideration, and both parties (the primary applicant and co-applicant) are held responsible for repaying the loan. Note that in case of default on the loan, your co-applicant’s credit will be impacted.
5. Improve your debt-to-income ratio
Your debt-to-income ratio is your total monthly debts divided by your monthly income. Banks generally don’t approve loans that are beyond your financial capacity. Hence, try to keep your debt-to-income ratio as low as possible to indicate that you are not overly burdened by debt and can manage new loan repayments comfortably.
Here are a few ways to improve your debt-to-income ratio:
- Repay existing debt
- Increase your income
- Do not borrow unnecessarily
- Consolidate high-interest debt into one manageable EMI
Once you improve your debt-to-income ratio, you can apply for personal loans online with more confidence.
Key takeaways
No matter if you are considering a personal loan to cover large or small expenses, take note of the factors outlined above to increase your probability of getting approved. You have to select the right bank, maintain a strong credit profile, borrow responsibly, add a co-applicant, improve your debt-to-income ratio, and avoid applying for multiple loans in a brief timeframe.
