When you request a personal loan, the first thing a lender will check about you is your eligibility to obtain the loan. Until and unless you have met these personal loan eligibility criteria, which are similar to every lender with some unique differential factors, your application is bound to be rejected. Hence it is important that you understand the factors lenders consider to qualify you for a personal loan.
Following tips can help you qualify for a personal loan:
- Check and Improve your credit score
One of the crucial factors that will help you get your desired loan is a good credit score. Before you apply for one, make sure you check out your credit score, so that you can be prepared for the response.
Check your credit report
Even if your credit score shows that you’re creditworthy, it doesn’t show the lender the full picture of your financial stability. There are credit bureaus from where you can obtain a copy of the credit report without any cost to you.
These will reflect the debt outstanding and your history of repayments which significantly influences the decision of the lender to grant you a loan. So make sure to go through your report, verify if there are any errors, and take steps to improve upon your credit report, if possible.
Make timely payments of your bills
Timely payments can help you increase the score and even if you already have a sufficiently good score that can land you a personal loan with no difficulty, it can further lower the interest rate you may have to pay on loan. To improve your credit score, start making timely payments of the bills and expenses as soon as possible.
Lower your DTI ratio
A debt-to-income (DTI) ratio signifies that you can handle your finances and credits well. If you have previously availed of a loan that is pending to be repaid yet, consider paying it off first since it lowers your debt to income ratio.
Proof of your steady earnings
Along with all the previously mentioned factors like your credit score and DTI ratio, lenders also want to ensure that you have a steady flow of income so you won’t be missing the repayments in the future. To check this, they scrutinize your employment history, employer details, annual and monthly earnings, investments, etc.
Make a joint application
If your financial history is in ruins and is difficult to get back on track in a short time, apart from taking steps to improve your credit score and boost your income, you can also consider applying for the loan with a co-applicant. This way the co-applicant’s credit score and earnings can make sure to get approved for the personal loan.
Find a suitable lender
Lastly, make sure you choose the suitable lender in accordance with your requirements, past relationship, type of credit facilities offered, etc. If you do your research, you may find that although many lenders look quite the same in regards to their terms and conditions and eligibility criteria, few offer differential services to certain classes, income levels, debt status, etc.
Make sure to compare them and their credit products before you make a decision to apply for a loan and go for a reputed lender with a good customer standing in the market, offering a low-interest rate.