A Personal Loan can go a long way in helping one tide over a difficult financial crisis or a sudden financial requirement. There are various reasons for which individuals suddenly may need a personal loan such as a wedding in the family, education, travel or some other event that requires a significant one-time payment. A personal loan is popular as it tends to solve the issue of the much-required cash without the need for providing a collateral and is hence faster.

Earlier, dependence on the unorganized sector such as money lenders who charged exploitative interest rates was high. Today, while banks and financial institutions provide personal loans, many Borrowers remain outside the purview of this sector due to limited access to data. Traditional FI’s continue to evaluate applicants against a few parameters and often Borrowers are not able to meet these criteria. P2P Lending is bringing Lenders directly in contact with Borrowers, removing intermediary cost and offering lower interest rates. Using a tech-enabled platform online P2P loans use new age data to evaluate the Borrower’s ability, stability, and intent to take a personal loan and are faster and cheaper.

Here are some tips that one needs to keep in mind to increase their chances of getting an approval for a personal loan instantly:

1- Check the Eligibility Criteria of Loans Before Applying

Before applying, one should be well aware of the Loan Eligibility criteria required by different lenders. Usually, there are certain age criteria and a minimum level of fixed income. Most of the lenders prefer borrowers to be in the age group of 21-55 years of age. Also, the borrower should earn a required minimum amount annually. Further, there should not be any defaults on previous loan payments or credit card dues.

2- Check the Credit Score

This is one of the most important things that one should keep a check on. A credit score is an analysis of a person's credit files and represents the creditworthiness of the person. Different lenders have different standards for rating credit scores. A CIBIL credit score of 700 and above out of a total of 900 is considered to be a good credit score. However, on P2P Lending Platforms like Faircent, CIBIL score is not the only criteria. Faircent uses more than 400 data points to evaluate a loan application across 120+ parameters. This brings many erstwhile underbanked or unbanked, under the purview of organized credit.  

Obtain the CIBIL credit report before applying for a personal loan and rectify errors, if any. A good credit score increases the chance of loan approval and also helps in getting an attractive interest rate. One can always improve one’s credit score by paying bills especially credit card dues on time and reducing the debt to available credit ratio.

3- Avoid Multiple Applications

Most of the time lenders check existing application status. Applying for credit from multiple sources is thus not recommended. Further, if one has multiple loan applications which are not approved, then the credit score gets negatively affected.

4- Previous Loan Records

One should not have availed a similar type of loan in the last six months. If so, the lenders become hesitant in providing another loan thinking that the burden of a new debt obligation and repayment may be too much. There should be a gap of at least 6 months between a new loan application and the previous ones.

5- Realistic Personal Loan Amounts

One should apply for a loan amount based on one’s ability to make the associated repayment. Applying for an enormous amount may lead to disapproval of the loan. Lenders conduct a check of the income and repayment ability of the candidate before approving a loan. Hence, aim for a realistic amount in order to avoid a loan rejection. Also, try to maintain a healthy ratio between your income and the EMIs from all other loans. The total of EMIs from loans should not exceed 30% of the income.

6- A Mix of Secured and Non-Secured Loans

A secured loan is one where a collateral is provided by the borrower to the lender. However, in personal loans, the borrower does not have to provide any kind of collateral to secure the money. One should balance the number of secured and non-secured loans, thus improving the credit score and reassuring the lenders that the loan will be paid back on time.

7- Job Stability

One should have a stable job and must be serving the organization for a minimum of 6 months. Most lenders prefer candidates who have an experience of 2 years or more. So, avoid switching jobs if one is thinking of applying for a loan. Stability in the job is required to ensure that there is a steady source of income. In the case of personal loans, there is no collateral, so the lenders typically avoid lending money to someone who doesn't have job security.

All these numerous factors like the ability to repay, income, job stability, the amount required, and credit score are taken into consideration while approving a loan. A proper understanding of the nature of the loan and all the above-mentioned aspects regarding the loan will reduce the chances of loan rejection. Keep an eye out for newer avenues of taking loans. P2P Lending is one such avenue that is enabling Borrowers to access cheaper and faster personal loans.