A personal loan has become a go-to source of funds for borrowers in times of financial distress. However, approval of such loans depends on various factors, from monthly income, credit history to job stability and more.
Since personal finance options are unsecured by nature, you are not required to provide collateral. So, lenders typically fall back on specific criteria while checking for your personal loan eligibility. Therefore, to ensure a speedy and smooth loan process, you should pay due diligence and accommodate some changes that can impact your loan eligibility positively.
Here are five financial habits you can adopt to secure funding smoothly and conveniently.
#1 Maintain a good CIBIL score
A good CIBIL or Credit Information Bureau (India) Limited score indicates your meticulousness in loan repayment. Lenders usually check your credit score to determine your repayment ability. As such, your credit score plays an important role, especially when availing of unsecured loans like personal loan. CIBIL scores typically range from 300 to 900, but lenders prefer a score of 700 or above. A good credit score can also help you avail of relatively competitive personal loan interest rates.
#2 Timely bill payments
If there is one habit that almost all lenders appreciate, it is timely bill payments. Regular bill payments show lenders that you are a disciplined borrower with control over your finances. On-time payments indicate a healthy financial habit. Whether it is clearing your utility bills or your credit card bills, always remember to clear the dues promptly.
Besides, to plan your finances well in advance and avoid any delayed payments, you can always rely on a personal loan EMI calculator online.
#3 Take a loan only when necessary
It is wise to apply for loans only when you need monetary support. Frequent loan applications reflect poorly on your credit history. High loan frequency also implies you pay EMIs more frequently, giving the lenders a negative impression on your finances. Moreover, such an image is likely to hamper your chances of getting loan approval.
#4 Keep a low credit utilisation ratio
The credit utilisation ratio is the ratio between the amount of debt you have and the available credit limit. Keeping track of this ratio is especially important for credit cardholders. In case your credit utilisation ratio is high, your credit score can drop and eventually impede your chances of getting the loan approved. Thus, make it a point to utilise your credit limit wisely.
#5 Avoid owning multiple credit cards
Possession of multiple credit cards means you may have multiple debts to repay; in such a scenario, the probability of missing a bill payment increases and may even lead to payment defaults, which can negatively affect your credit score. Thus, you are recommended to have just one or two credit cards. This way, you can manage the debt effectively and clear the dues on time.
While personal finance is readily accessible, lenders have certain criteria in place to approve loans. So, keep these tips in mind when you make financial choices, and you no longer have to worry about your personal loan eligibility.