Loan eligibility plays a big role in whether your loan gets approved or not, a good eligibility score can also get your lower interest rates and better repayment terms. The good news is that your odds can be significantly improved by making a few little changes.
According to a 2024 financial survey, customers with a credit score of 750 have a 60% chance of getting loans with interest rates that are 2-3% lower than those of borrowers with scores below 650.
Understand What Affects Your Loan Eligibility
Before improving your eligibility, you need to know what factors matter:
- Credit score: A higher credit score (700+) indicates good credit management.
- Income level and stability: Lenders prioritize borrowers with stable and substantial income.
- Existing liabilities: Too many loans can make it difficult to obtain new ones.
- Age and Employment type: Your age and occupation type (salaried or self-employed) also affect the approval.
|
Factors |
Importance (1-5) |
Why it matters |
|
Credit Score |
5 |
Reflects your history of repayment |
|
Income Stability |
4 |
Ensures that you can handle EMIs |
| Debt-To-Income Ratio |
4 |
Shows your ability to take new debt |
|
Employment Type |
3 |
Salaried jobs signal stability |
|
Age |
2 |
|
Tips to Boost Your Loan Eligibility
Improve your Credit score
- Pay your EMI and credit card bills on time every month. (One late payment can decrease your score by 50-100 points)
- Use only 30-40% of your credit limit.
- Avoid applying for many loans as it can damage your credit score. (It can drop your score by 5-10 points per application)
Increase your income
- Include all sources of income, not just your salary.
- This includes rental income, freelance employment, and any bonuses.
- Adding extra income can increase your loan amount by 20-30%.
Reduce existing debt
- Clear minor loans to lower your monthly expenses.
- Reducing your debt-to-income (DTI) ratio enhances eligibility .
- Keep your debt-to-income ratio (DTI) below 36%. For example, if you earn ₹25,000/month, debt payments should be under ₹9,000.
Choose a longer loan tenure
- Longer repayment periods lead to cheaper EMIs.
- Which are easier to manage and increase the likelihood of loan approval.
- A 7-year loan vs. a 5-year loan cuts your EMI by 15-20%.
Apply with a Co-Applicant
- Adding a co-borrower, such as a spouse or parent, might boost your overall income.
- This increases your eligibility for a larger loan amount.
Maintain a stable employment history
- Maintain your current job for a minimum of 2 years, especially if you’re salaried.
- Stability shows the lenders that you have a secure source of income.
- Impact: Stable jobs boost approval chances by 30%.
Common Mistakes That Hurt Your Loan Eligibility
- Taking out too many debts at once, or borrowing more than needed
- Neglecting or failing to monitor your credit score periodically
- Applying for multiple loans in a short period gives a negative signal to lenders
Conclusion
Small, strategic efforts might have a significant impact on your loan eligibility. Concentrate on your credit score, income, and debt management. Be proactive: begin preparing before asking for a loan to ensure the best possible terms.
Tip: Check your credit score today and make a plan to improve it with Credit Assist. You’ll be ready for that dream loan in no time!
FAQ
- What is loan eligibility?
Ans. Loan eligibility is how lenders decide if you are capable of a loan. They check your age, employment, debts, income and credit score to determine whether you can repay or not.
- Why is my Credit score so important?
Ans. Your credit indicates whether or not you make bill payments. When your score is higher than 700, you appear more reliable, which increases your chances of getting a loan with a low interest rate.
- How can I improve my credit score quickly?
Ans. Don’t apply for more than one loan, utilize only 30-40% of your credit card limit, and pay your credit card bills and EMIs on time. Checking your score monthly helps spot issues early.
- Why is staying in the same job important?
Ans. Staying in a job for 2+ years shows lenders you have steady income. This boosts approval chances by 30%.
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