Personal loans are among the most popular types of loans available today. Personal loans can in helpful for scheduled or unanticipated needs such as holidays, weddings, or medical situations that exceed your financial capacity.

People need money for a variety of reasons, particularly with COVID-19 grinding the economy to a halt and, as a result, negatively impacting many people’s livelihoods. This explains why 77% of Indian workers rely on personal loans to make ends meet. Taking up a personal loan is regarded as a good option if you can comfortably make the repayments over the course of the loan.

To qualify for a personal loan, you must meet the lender’s eligibility requirements. This article will teach you everything you need to know about personal loan eligibility and how to increase your chances of acquiring one.

Top 10 Tips for Getting Approved for a Personal Loan

Everyone may need to borrow money at some point in their lives to cover expenses. In such cases, a personal loan is a popular and practical solution; it can even help you accomplish wise financial management! How do loans relate to credit ratings? Here are ten suggestions for securing a personal loan.

1. Build a good credit history

To be a solid candidate for a speedy loan approval, you must be able to demonstrate a positive credit history. Building a credit history and obtaining a credit score might take time. However, waiting a bit before applying improves your chances of approval.

But don’t worry if your credit history isn’t flawless—you don’t have to be perfect to qualify for a loan. You only need to create a track record of timely payments and demonstrate your ability to make those payments. So, before applying for a larger loan, you might wish to start with smaller loans to develop your credit history.

You can check your credit history and score for free online with Equifax or another Australian credit reporting body. By the way, you can get access to your credit report for free once every 3 months in Australia.

2. Maintain an above-average credit rating

To have a good chance of getting approved for a loan, your credit score should be at least average or higher. Bankruptcy, defaults, and even late or missed payments will have an impact on your credit rating. Yes, you can recover from these effects. However, you must give it time and exhibit improved financial management skills.

Alternatively, if you’re just starting off, make sure you manage your money wisely and don’t accumulate a lot of debt on your credit cards. You will want to do all possible to maintain a decent credit score.

3. Meet the loan criteria

One of the most basic recommendations for rapid loan approval is to review the eligibility requirements. Then double-check them for accuracy. There’s no point applying if you’re going to get approved right away. If lenders notice that you have been turned down multiple times in a row, your prospects of getting authorized elsewhere will only go worse.

For example, if you have poor credit, you should not apply for a loan that requires good credit. Look around to see what else is available that might be a better fit. So don’t despair if you have bad credit; there are cash loan solutions available to you.

However, do yourself a favor and read the FAQs and loan requirements list of any lender you are considering. If you can check every box, go for it!

4. Show you can keep a job

An excellent employment history can help you obtain a loan approved quickly. Lenders want to know that you aren’t likely to abandon your employment, making it difficult to make payments. They will expect you to have been working for at least six months before applying.

The longer you’ve had decent, steady work, the better your loan application will look. Job stability = consistent income, which equals the ability to make loan payments.

5. Try to establish a good debt-to-income ratio

If you’re drowning in debt, we understand why you want a loan. However, a little personal loan may not be sufficient at this point in your financial path. Consider getting a debt consolidation loan to help you get back on track.

Swoosh Finance provides Online Debt Consolidation Loans of up to $5,000 to help you get your debt under control.

Remember that if you have only a small amount of debt, you should be fine. Lenders do not mind debt as long as you have an income that demonstrates your ability to continue repaying the debt.

6. Apply for the right amount

Don’t go overboard with the amount you ask for on your personal loan. The best likelihood of being authorized is to apply for the least amount that will help you.

Read Also: Understanding Credit Scores and Reports

Even if the lender offers more, do not be greedy. The lower the payment, the easier it will be to make that payment and possibly additional payments. So you can reach financial freedom without incurring needless debt.

7. Get your paperwork in order

Aside from filling out the application, most lenders will require documentation to prove your identity, income, and other personal information. Before you apply for a loan, be sure you have access to all of your necessary paperwork.

To expedite your application, you will need rapid, easy access to the relevant papers. Otherwise, you could spend days fumbling through your closet’s boxes and taking your time processing.

8. Don’t rush the application

Do not be in such a hurry to submit an application that you overlook any of the specifics.

It is critical that you do not mistakenly enter the incorrect number for your bank account or, worse, enter an additional number for your income. Or you could make a simple error, such as reverse the number on your new address. Any of these concerns may cause your loan application to be delayed or denied.

So double-check your application and you’ll be set to go!

9. Make sure you can make the payment

Before agreeing to any loan, double-check that the payment is appropriate for your specific financial condition.

Check to see if you can still make the final anticipated payment after accounting for interest. It is preferable to continue looking for a loan than to accept a payment that will be difficult to make during the term.

So check your budget, do the numbers, and try to make your payments on the days you get paid. Automatic payments are your best friend in this scenario. That way, the amount is deducted when you receive your check and pay right away.

10. Don’t ask everyone in town for money

It is not always true that “if at first, you don’t succeed, try, and try again.” Before applying for a loan, you should do your research and be quite confident that you will be approved. Because every time your credit is checked, you lose points. So keep that in mind and look for a lender who you believe will work for your needs.

What Makes Personal Loans Ideal?

Before we look at personal loan eligibility and the standards that you must satisfy to have your personal loan application approved, let us first examine why personal loans have risen to prominence and become a popular choice for many people.

One of the key reasons people choose personal loans is that they are unsecured. Unlike home or vehicle loans, applicants do not need to present the lender with any kind of security or collateral in order to obtain the loan. Because no collateral is necessary, the documentation required to apply for a personal loan is significantly less than that of any other sort of loan.

Another reason why individuals choose personal loans is that once authorized, the borrower can utilize the funds for whichever purpose they see fit. Lenders do not restrict or prohibit the final use of funds secured by a personal loan. A personal loan can be used to support a variety of expenses, including paying off long-term debts, automobile or housing down payments, and outstanding credit card bills, as well as financing a function or home remodeling.

Finally, personal loan interest rates are fixed, unlike credit card interest rates, which fluctuate over time. This way, you will not only be paying a fixed amount every month but you will also be able to track your payments easily.

The Indian working class bears a great deal of responsibility and, in most circumstances, struggles to make ends meet on their monthly wage, which is barely enough to cover their daily costs.

They struggle to fulfill their demands and have no supplementary savings, making it tough to deal with when an unexpected cost emerges. When they are unable to obtain a personal loan from a bank, they are forced to turn to money lenders, who demand high interest rates and impose harsh lending conditions.

Personal Loan Eligibility

When you need a specific amount of money or are short on funds, you can apply for a personal loan from a financial institution. While you can quickly apply for personal loans online, you must meet certain eligibility requirements before the loan can be approved. Personal loan conditions vary by lender based on specific limits and general needs.

Here are some of the basic requirements that you must meet:

1. You need to be between the age of 18 to 60 years.
2. You should be an Indian citizen.
3. You should have a work experience of at least 12 months.
4. You should be working with your current employer for not less than 6 months.
5. You should be drawing a monthly salary of INR 15,000 or more.

In addition to this, along with a duly filled application form, you also need to be able to furnish the below-mentioned documents to the lender:

• A recent passport-sized photograph.
• Salary slips and income proof.
• Address proof like driver’s license, Aadhar Card, Voter ID, and passport.
• Identity proof like PAN card, Aadhar card, or government ID for those employed by the government.

Keeping a regular check on your credit score (a three-digit number ranging from 300 to 900, that indicates your creditworthiness) is also imperative to ensure that you are eligible for a personal loan. 

5 Questions to Ask Before Taking Out a Personal Loan

1. How much money do I need?

The smallest personal loans start around $500, but most lenders require a minimum of $1,000 to $2,000. If you need less than $500, it may be more convenient to save money, utilize a credit card, or borrow from a friend or family member.

For borrowers seeking smaller loans, PenFed, a federal credit union, offers a variety of personal lending choices. Customers can borrow as little as $600 or up to $50,000.

2. Do I want to have the money sent to my bank account?

When you take out a personal loan, the money is normally deposited into your checking account. If you’re utilizing a loan to consolidate your debts, some lenders will send the money directly to your creditors.

If you prefer a hands-on approach or intend to use the funds for something other than debt repayment, have them wired to your checking account.

If you want to consolidate your debts, a Happy Money personal loan could be an excellent option. Happy Money lets you deposit the funds you borrow into your linked bank account or directly to your debtors.

3. How long will I have to pay it back?

You must repay the loan firm in monthly payments within 30 days. Most lenders provide payback durations of six months to seven years. The length of your loan will have an impact on both your interest rate and monthly payment.

4. How much interest will I pay?

Your interest rate is determined by a variety of factors, including the loan amount, your credit score, and the term, or length of time you will repay the loan. Interest rates can range from 5.99% to more than 29.99%. You’ll typically get the lowest interest rate if you have strong or excellent credit and choose the shortest repayment term feasible.

According to the most recent Fed data, the average annual percentage rate (APR) for 24-month personal loans was 12.17%. This is frequently far lower than the typical credit card APR, which is why many customers use loans to consolidate credit card debt.

Personal Loan Most APRs are fixed, which means they remain constant over the life of the loan.

5. Can I afford the monthly payments?

When you apply for a personal loan, you can select the repayment plan that best suits your income level and cash flow. Lenders will occasionally offer an incentive for adopting autopay, cutting your APR by 0.25% or 0.50%.

Some borrowers like to keep their monthly payments as low as possible, therefore they choose to repay their loan over a number of months or years. Others wish to pay off their loan quickly, so they select the largest monthly payment.

Choosing a modest monthly payment and a long repayment term is generally associated with a higher interest rate. In the long term, you will pay more for the debt.

Borrowers should strive to spend between 35% and 43% of their income on debt, which includes mortgages, vehicle loans, and personal loan installments. If your monthly take-home pay is $4,000, for example, keep the total debt commitments at $1,720 or less each month.

Mortgage lenders, in particular, are notorious for rejecting loans to those with debt-to-income ratios greater than 43%. Personal loan lenders are more tolerant, particularly if you have good credit and proof of income. If you believe you can manage larger payments temporarily to save on interest, you may be able to adjust this ratio slightly to accept a higher monthly payment.

A debt-to-income ratio of more than 40% makes it more difficult to get approved, and stretching yourself too thin may result in cash flow issues. You should only do this if you have a backup plan in place, such as a partner’s income or an emergency fund.

Bottomline

Personal loans are most useful when you have a plan. After you’ve answered these questions, conduct a soft inquiry on the lender’s website or a third-party loan marketplace to explore your possibilities without jeopardizing your credit score. Only when you’ve seen what you prequalify for should you make a hard inquiry.