A personal loan is a money that you use for various purposes. Whether it may be for unexpected medical fees, home renovation needs, student loan costs, etc., a personal loan can be an ideal alternative source of money in times of need. Unlike other loans, personal loans often come unsecured, which means collateral is not required. However, you have to pay the monthly dues, including the interest, over some time.
So, if you are thinking of availing of a personal loan for the first time in your life, it is crucial to know some tips so that you can get your first personal loan approved.
With that, here are four essential tips to follow to increase your chances of being approved for a personal loan.
- Always check the basic eligibility criteria.
Checking the personal loan eligibility criteria should be your utmost priority. A standard error done by applicants is sending multiple applications to the various lender without even checking this critical information. This frequently leads lenders to disapprove of the request at the start without processing it. With that, it is always a good idea to check the eligibility criteria before applying for a loan. Most of the time, the eligibility criteria include:
- The applicant is aged 21 to 60 years;
- The applicant must be employed in public or private entity must at the time of application;
- The applicant must have worked for at least six months in her current company or organization
- The applicant must make a salary every month.
- Simultaneous application to several lenders is not advisable.
One of the most common mistakes made by those who wish to receive a personal loan is applying simultaneously to multiple lenders. Applying to several lenders at the same time might appear negatively on your credit score that can result in your application being disapproved. With that, it is crucial to do your research well first and then apply to credit institutions or lenders where the probability of your application being approved is greater.
- Select your loan amount appropriately.
After prudently assessing your requirements, select the appropriate loan amount. This means that you should only borrow an amount after ensuring that you can pay the monthly dues comfortably. Make sure to check your debt-to-income ratio, for it functions a vital role in the approval of your loan. In most cases, you have obligations that amount to more than 30% to 40% of your income is assessed to be dangerous and can lead to your application being rejected.
- Keep a satisfactory credit score
A crucial element in approving your loan application is your credit score. Maintaining good credit scores will help you get your loan approved. Credit scores are estimated by considering several factors, including your debt to credit ratio and repayment record. With that, there is a higher probability that your loan be approved if you have been punctual in repaying previous loans. A credit score ranges from 0 to 1200. In most lenders, a score of 700 and above is considered good and can significantly increase the chances of your loan being approved. So, it is always a good idea to maintain a good credit score, whether it is your first time applying for a loan or not.