Personal advances have become quite popular financing options in the present day because they are easy to avail. They are collateral-free advances that come with simple eligibility and minimal document requirements. These loans are typically availed in small loan ticket sizes to meet varying financing needs.
These loans also come with zero restrictions to end-use. This feature makes these loans eligible financing options for individuals to fulfil a wide range of spending needs. Whether you need urgent cash to handle a medical emergency or meet a financial crunch, a personal loan can help.
These loans have no lender-imposed restrictions on use. The loan amount is directly disbursed into your bank account, thus giving you complete financial freedom. However, before applying for a personal loan, you must know the right tips to get your loan approved.
Read on to discover the 5 most important tips that can help you get your loan approved with ease.
5 Tips to Get Your Personal Loan Approved with Ease
While applying for a personal loan, you must make sure that your application exactly matches the lender’s requirements. Failing to meet the requirements would result in a loan rejection or a loan delay. Here are 5 tips that you must know to get your loan approved with ease.
- Meet all eligibility requirements and keep documents handy before applying
One of the best ways to increase your chances of small loan approval is to meet all eligibility criteria set down by your lender. As these loans are unsecured advances, the need to fulfil the set criteria is high.
These requirements usually span around your age, income, credit score, and city of residence. Along with these requirements, you must be ready to submit all required documents. When applying for the advance with an online loan app, paperwork is further simplified with minimal documentation requirements. But make sure to submit the documents in the requested format.
- Apply for a loan amount under your maximum eligibility
When choosing a loan amount, you must also consider your maximum eligibility for the advance. Accordingly, it is best to choose a loan amount that remains within this maximum eligibility limit. Exceeding this eligibility limit will result in loan rejection. If you choose a loan amount that is equal to your maximum financing eligibility, it exhausts your borrowing capacity. It further burdens your monthly income with a high repayment liability.
You can take the help of dedicated financial tools like a small loan eligibility calculator available online to make this assessment. Also, note that different lenders have different eligibility criteria. So, make sure to check out with different lenders before submitting your loan application.
- Keep a check on your financial ratios
Your individual financial ratios can be crucial in determining the ease of personal loan availability. In this assessment, two financial ratios are of critical importance, namely the fixed obligation to income ratio or FOIR and the credit utilisation ratio. FOIR requires you to maintain your fixed obligations under 50% of your fixed monthly income.
The credit utilisation ratio is supposed to be maintained under 30%, which means you must not utilise more than 30% of your total available credit. These two ratios serve as crucial parameters when assessing borrower creditworthiness and can help bring easy small loan approval.
- Work on your credit score improvement
Your credit score is the first thing that a lender checks to assess your creditworthiness. Ideally, a high credit score is required to avail easy approval of the advance. You must thus check if you meet this requirement. If not, it is only ideal to take steps that help improve the score at least 6 months before applying for the loan.
There are some lenders who offer personal loan despite your credit score. You can check with them in case your credit score is not that high. Many loan apps also offer personal loans to people with a low credit score. However, having a good credit score helps you secure the best loan terms.
- Document all income sources
If you have more income sources than one, you can leverage all of them to get easy approval for your loan. When applying for your personal advance, you can thus document all these income sources and represent a high repayment capacity for convenient approval of the required loan amount.
The higher your income, the higher is your loan eligibility. So, make sure to document additional income like rental income, income from investments, or any other income. However, make sure to have the necessary income proof to substantiate your income claims.
Once you have seen yourself through all these aspects, availing approval for your small loan should not be a challenge. When availing financing, you must also see if other terms of the loan are turning out favourable for you. For instance, you must check the affordability of this advance based on the interest rates and charges levied. You can compare different lenders in the market to decide on the best lender offering the lowest rates.
Further, you can also leverage financial aspects related to your borrowing profile to secure the best rates on your personal loan. When deciding on the loan amount to avail, you can check its repayment affordability with the help of a personal loan EMI calculator available online. Platforms like online loan apps provide these financing tools for free. You can assess the feasibility of your borrowing decision and apply for the loan accordingly.