Tips on improving your chances to get a personal loan approved

If you are looking to get a personal loan, then you may not notice, but the criteria have been tightened. The reason is the current coronavirus pandemic, which has affected people's livelihood. However, people's financial needs are no-where will decrease.

This is why the majority wants to take a loan to pay expenses. It might be the EMI or a children's fee or the monthly rent. As a borrower, you may apply to several lenders, but many of them will reject the application for many reasons.

It does not matter whether you are applying at traditional banks such as SBI, ICICI, or modern NBFCs such as Bajaj Finserv personal loan. The changes of getting rejected have been increases. So, if you want to increase the approval chances, here are few tips for doing it.

First, Check the lender eligibility criteria.

This is the first thing you have to look for. Do not apply for the loan unless you have checked the eligibility criteria. Every lender has different eligibility criteria to offer the loan. If you fit as per the criteria, the loan application will be rejected.

It will not be suitable for your credit score. Because if the application is rejected, the inquiry will be recorded, lowering the credit score. In the future, it will create an issue. So, avoid applying unless you are sure about qualifying the eligibility criteria.

What is your credit score?

A credit score is a three-digit number telling about the borrower's creditworthiness. It ranges from 300 to 900 based on various factors. As a borrower, you should check the credit score for each lender. Every lender sets a different minimum credit score to offer the loan.

A credit score of 700 is considered acceptable to apply for an instant personal loan. However, if the credit score is lower than this, your loan application approval chances will decrease. The other thing is a lower credit score might result in a higher interest rate on loan. You might be using an EMI calculator such as Bajaj Finserv personal loan EMI calculator without knowing the interest rate only later to find out it is much higher because of lower credit score.

Do not apply to multiple lenders at once

You should know wherever you apply for the loan, the next lender will know about the previous application. So, when you apply to multiple lenders, they see a weak applicant—an applicant who does not have the confidence to apply at a single lender to get the loan.

There are various effects of this approach. First, it will increase the chances of loan application rejection. The second thing will affect the credit score hence lowering the creditworthiness. So, do proper research about the lender. Every aspect should be checked out. Aspects such as what will be the loan amount? What is the eligibility criteria? How will the loan proceed?

Once you have checked it, and then finally apply for the loan.

Did you check your credit report?

Not many borrowers do it; however, for yourself, make it an exception. From time to time, get your credit report to check if it contains any errors. Experian (Credit bureau) offers the credit report once a year for free. If you found any error, make sure to inform the bureau to rectify it.

For example, let’s say you have moved to a new location but did not update it. Now, your old location might have a bad reputation for a loan. Yes, location also impacts the chances of getting an instant loan. Since the report has an old location address, it will affect the application.

Nevertheless, once you update it, the chances will increase. So, check your credit report; if found any error, get it corrected.

Take a break if the loan is rejected.

If you had applied for a loan, it got rejected; it is best to break. Do not try to apply for another loan. The timeline should be a minimum of 1 month before you apply. You must analyze the matter, see what went wrong, improve it, and then apply.

In a personal loan, generally, the credit score is the reason behind the loan rejection. If it is the reason, then you have to work on improving it. If you applied with an improved score, the change of approval would increase; otherwise, it will go down further.

A personal loan would definetly help you in an emergency. However, before you apply for the loan, exhaust every other option before deciding to take a personal loan.