Getting a personal loan is a good idea if you have a stable income and a good credit score because you will then be offered a low rate of interest. Loan against Salary is a special personal loan, which is an option for salaried people to meet their self and family exigencies, such as, medical emergency, higher educational expenses of children, house renovation, tour or wedding expenses etc. Although, individuals with minimum monthly income of Rs. 25,000 are preferred more by the banks. And for self- employed individuals, a gross annual income of minimum Rs. 5 lakh is usually needed to qualify for a personal loan. Generally, personal loans are not taxable, since the loan amount is not considered as a part of your income when you’re filing income tax returns. This means that you won’t need to pay any income tax on personal loans.
You may need money for different planned and unplanned expenses, be it a wedding, home renovation, higher education, vacation, medical emergency, or debt consolidation. If you are not financially prepared for it, the cost may drain out your savings, or worse, harm your financial health significantly. This is when personal loans come in handy. Not only do they offer an ample amount at your disposal, but they also get approved instantly and disbursed within minutes. Since they can be excellent sources of finance in times of need, they have become a popular financial option in India today. However, you need to fulfil the lender’s eligibility conditions to qualify for a personal loan. If you want to ensure loan approval with favourable terms and conditions, use these five simple tips that can help you improve your personal loan eligibility.
Reduce Your Debt-to-Income Ratio:
Before you apply for a personal loan, ensure that you pay off your existing debts and credit card bills to reduce your debt-to-income ratio. Your current debts and credit card due amounts may pose you as a credit-hungry borrower and make it challenging to get another loan. Ideally, the total amount of EMIs you are paying at present should not be more than 30-40% of your monthly income. If it is more than that, pay it off before making a new loan application.
Improve and Maintain Your Credit Score:
Since personal loans are unsecured, lenders rely on your credit score to determine your creditworthiness. A credit score of 725 and above can project you as a responsible borrower who remains consistent with the payments. As a result, the lender does not see any risk in lending you, and your chances of approval increase significantly. A credit score less than 725 implies that you do not have a clean repayment record, and the lender may quickly classify you as a high-risk borrower. As a result, they may outright reject your loan application or charge a higher personal loan interest rate from you.
Include All Your Income Sources:
Lenders also look at your income to measure your repayment capacity. Therefore, while filling up the online loan application form, you must mention not only your regular salary but all your income sources, including any rental income, part-time income, or anything else. Doing this will prove to the lender that you are earning enough to make timely repayments.
Do Not Apply for Several Loans at a Time:
When you apply for a loan, lenders make a hard inquiry with a credit bureau to estimate your default risk. If you apply for several loans simultaneously, all the lenders will make multiple hard inquiries on your credit report, which will eventually reduce your credit score. Since they will perceive you as a credit-hungry borrower, they may also reject your loan application. So, it’s better to compare lenders beforehand and apply for one that best fits your requirements and personal loan eligibility.
Find a Lender with the Eligibility Criteria You Can Fulfil:
Instead of applying to several lenders only to know that you are not eligible for their loan, check the eligibility conditions of different lenders and find the one with eligibility criteria you can fulfil. For instance, Clix Capital has the following eligibility conditions that are relatively simple to fulfil:
• You must be between 25 and 58 years of age
• You must have a monthly income of at least Rs. 25,000
• You must be working with your current employer for at least 6 months
• You must have work experience in the current field for a minimum of 12 months
If you fulfil these conditions, you only need to get your essential documents verified online to complete the loan application process.