A popular financing solution, personal loans are easily available and place no limits on how you use the loan amount. You can use them to meet various expenses such as:
- Travel or holiday
- Education or upskilling
- Home improvement or repairs
- Medical or health-related needs
- Marriage
One of the reasons why they are so convenient is because personal loans are unsecured, which means you do not need to provide collateral to get financial support. They are also a quick source of funding, as you can get the loan amount in your bank account in as few as 24 hours. However, getting fast approval and an affordable personal loan offer means paying attention to certain factors.
Read on to know 6 important factors that affect your personal loan offer.
Creditworthiness
Your credit or CIBIL score is one of the most crucial factors that lenders consider when deciding whether to approve your personal loan application. This 3-digit number ranges from 300 to 900 and represents your creditworthiness. The higher your credit score, the more likely you are to be approved for a personal loan, and the better the terms and conditions of your loan offer.
Income and employment history
Lenders also consider your earnings and work history when deciding whether to approve your personal loan application. This is because both of these factors directly determine your ability to repay the loan amount. If you have a stable job and a steady income, you are more likely to be approved for a personal loan.
Debt-to-Income ratio (DTI)
Your DTI is another important factor that lenders consider when assessing your loan application. This is the ratio of your monthly debt payments against your monthly income. A high DTI indicates that you have more debt in relation to your income, which may make it difficult for you to repay the loan amount.
Lenders generally prefer borrowers with a low DTI, typically below 40%. If your DTI is high, you may still be eligible for a personal loan, but the terms and conditions of your loan offer may not be as favourable as those for borrowers with a low DTI.
Age
While the minimum age to take a loan is usually 21 years, lenders also have a maximum age limit, usually between 60 to 65 years. Beyond this, they may not approve personal loan applications. This is because lenders evaluate your ability to earn and repay, and if you are nearing the end of your career, getting an affordable loan offer may be more difficult.
Rapport with the lender
If you have an existing relationship with the lender, such as a savings account or a credit card, you may be able to negotiate better terms and conditions for your personal loan. Lenders may also offer special discounts and offers to existing customers.
Repayment tenure
The tenure is the period within which you must repay the loan and your choice of tenure can also affect your loan offer. A longer repayment tenure typically results in a higher interest rate, while a shorter repayment tenure results in a lower interest rate. This is because a longer repayment tenure increases the risk for the lender. As a result, lenders charge a higher interest rate to compensate.
However, by choosing a tenure that is too short, your EMIs may come to a higher amount, which can strain your finances. So, choose the ideal tenure based on your income.
By understanding these factors, you can improve your chances of getting approved for a personal loan with favourable terms. Don’t forget to shop around and compare loan offers from different lenders to find the best deal. With the right preparation and research, you can secure a pocket-friendly personal loan.
To access the top personal loan deals with ease, use the Bajaj Markets App. This digital platform provides various financial products. Simply download the app from Google Play or the App Store and gain access to a variety of cost-effective personal loan options in a single click!