8 Proven Tips to Get Your Personal Loan Approval Quickly

September 11, 2021 Mutual Fund

Personal loans are beneficial in emergencies and during a financial crunch. These can be availed with minimum documentation and do not require any collateral. With many banks and NBFCs, promoting instant personal loans aggressively, getting a personal loan approved does feel like a child’s play. However, When you actually apply for it, there can be many eligibility requirements, terms and conditions that financial institutions do not disclose up front, which at times results in delayed processing of a loan.

As many people apply for a personal loan when they urgently need money, it becomes necessary to cut out all the possible delays by using these tips:

1. Apply online:

Applying for a personal loan online, is the fastest yet secured way to avail a personal loan. Once you apply by providing all the required information and upload the required documents, you will get a confirmation message from the lender. After verification of your profile and documents, the lender will approve or reject the loan application. And a significant advantage is that you get all the loan application updates through emails and/or messages. The loan approval process typically takes one week time after you have submitted all the required documents. Once approved, the disbursement can take another 1-2 days.

We suggest you to check with your existing bank for personal loan offers before searching anywhere else. Many banks nowadays offer pre-approved and pre-qualified personal loans based on your credit history and banking relationship. If you apply with such online pre-approved offers, you may get the personal loan amount disbursed in your account within a few minutes!

2. Maintain a good credit score:

A credit score represents your creditworthiness. Generally, a credit score above 700 is considered good, but having a credit score above 750 can be an added advantage in faster approval of a personal loan. Hence, to get your personal loan approved, you must have a good credit score. This is the most important criteria that the lenders use to evaluate your profile, especially in a personal loan because it is an unsecured loan that does not require any collateral. Therefore, your income and credit repayment history are the major factors considered while approving the loan. If your credit score is good, the lenders consider your profile as low risk profile, which means the possibility of you defaulting on the loan repayment in future is lower. This not only increases your chances of getting the personal loan approved quickly, but also helps in getting a better rate of interest and lower processing fees.

To improve/maintain your credit score, you should pay your EMIs on time and never default on any loan or credit card dues. The best way is to set a standing instruction with your bank for an auto-pay of all your EMIs. It ensures your EMI gets paid automatically from your registered bank account on the due date. Ensure you always keep a sufficient balance in your auto-pay registered bank account so that your standing instruction does not bounce.

3. Check your credit score before applying:

Even though you know you have never defaulted on any loan and have a good credit history, it is advised that you check your credit score before applying for a personal loan. There is a possibility that you missed out on a couple of credit card payments on due dates and paid it a day or two later. It can be challenging to keep track of multiple credit card bills. Although such delay in payments are unintentional, they can affect your credit score. Moreover, a credit score can have errors or mistakes which can lead to a loan rejection. Having a credit score beforehand can help you fix the score before applying for a loan.

Also, checking your credit score is essential because different lenders have different credit score requirements. If your loan application gets rejected, it can have a negative impact on your credit score. Therefore, it is a good practice to check your credit score and see if it matches the lender’s credit score eligibility.

4. Keep a good bank balance:

While checking your repayment capacity, lenders check if you are maintaining a good Average Monthly Balance. Banks calculate your Average Monthly Balance by adding the daily closing balance of all days in a month and dividing it by the number of days in a month. Therefore, if you maintain an overall good balance, banks/NBFCs consider lending you because it shows you have a good repayment capacity. Moreover, banks offer instant personal loans, pre-approved personal loans and pre-qualified personal loans that are completely seamless and hassle-free if you maintain a higher average balance in your savings account. Such personal loans are ready for disbursements, which can be credited into your savings account with just a few clicks. However, we advise you instead of getting fascinated by an instant loan and blindly availing it, you should read the terms and conditions, know the various charges, compare them with other lenders, and then make an informed decision.

5. Apply only with one lender:

When many of us are in urgent need of money, people usually apply for personal loans with multiple banks and NBFCs in order to increase the chances of getting a loan as soon as possible. However, the lenders can see that you have applied with numerous lenders, which might give them an idea that you are in a financial crunch and in a desperate position to avail of a personal loan. In such a scenario, it is possible that the lenders may avoid providing you with a credit facility. Moreover, multiple applications of loans may result in multiple rejections, which may have an adverse impact on your credit score. Also, it can be time-consuming to apply at various banks and NBFCs so, keep track of all the applications, and coordinate with multiple lenders.

Different lenders have different eligibility criteria. Although they all offer the same product, which is a personal loan, the features, benefits, rate of interest and other charges, can have a substantial difference. Therefore, before directly applying for a personal loan with any lender, you should research and choose the lender after checking their eligibility criteria and product features.

6. Keep all the documents ready:

Make sure you have all the required documents ready, before applying for a personal loan. Since it is an unsecured loan, lenders do not ask for many documents. However, you should check the lender’s official website or ask the bank representative to provide you with the list of required documents. Keeping all the documents handy will save your loan processing time. The lenders typically ask for the following documents:

• Identity Proof – PAN Card, AADHAR Card, Passport, etc.

• Address Proof – AADHAR Card, Voter ID, Passport, Electricity Bill, etc.

• Income Proof –

  • – For salaried applicants:

    Last 3 to 6 months salary slips

  • – For Self-employed applicants:

    Latest Income Tax Return (ITR) along with Computation of Income.

    Last two years Balance Sheet and Profit and Loss Statement certified by a Chartered Accountant (CA).

7. Provide accurate information:

Providing accurate personal and income details will not only increase the chances of loan approval but make the entire process smooth and hassle-free.

For example, If you have more than one income source, provide the details of all your income sources at once so that the lender will not have to come back asking for additional income related documents, if the primary source of income is insufficient for your loan repayment capacity.

Also, if you are staying on rent, you need to provide your rental agreement along with your permanent address proof.

8. Apply for, what you can manage to pay:

Applying for a higher credit limit than what you can repay leads to a loan application rejection. As you do not have to provide any security in a personal loan, you should only consider your income sources and apply only for an easily manageable amount that you will be able to repay. While assessing your credit repayment capacity, you should consider all the fixed and variable expenses, the possibility of any increased expenses, and your current dues.

Also, consider your debt-to-income ratio while applying for a personal loan. A debt-to-income ratio is a ratio of your monthly EMIs and your monthly income. Having EMIs less than 30% of your monthly income is considered as a good debt-to-income ratio. Higher the ratio, the higher the chances of loan application rejection. A higher ratio depicts your liabilities are more than your earnings. For example, if your monthly salary is Rs 50,000, and your existing EMIs cost Rs 30,000, your debt-to-income ratio is 60%. Lenders usually consider it risky if a debt-to-income ratio is more than 45%.

To Conclude:

Although availing of a personal loan might not be as easy as it seems, following all the above tips will help you get a personal loan approved quickly. We understand that in most cases, a personal loan is an urgent requirement, but we advise you not to apply for a personal loan in a hurry. Instead, do your research and apply to the lender with whom your eligibility and requirements match the best. Moreover, read all the terms and conditions and charges like processing fees, pre-payment charges, and foreclosure charges in advance, so that you do not get any unpleasant surprises later.

This article first appeared on PersonalFN here