The global pandemic has created widespread economic uncertainty, and sudden changes can occur without warning. During such periods, banks, NBFCs, and other lenders often tighten lending norms. With layoffs and salary reductions, lenders worry about rising NPAs (non-performing assets), and unsecured products like personal loans come under greater scrutiny.
Personal loans, which do not require collateral, face stricter underwriting when the economy is under stress. As more people turn to personal loans to cover everyday expenses, applicants benefit from presenting themselves as low-risk borrowers. Fortunately, there are practical steps you can take to improve your chances of approval and secure better loan terms.
Ways to increase your personal loan eligibility
- Clear pending dues: Lenders evaluate your fixed obligation to income ratio (FOIR), which measures your existing EMI commitments relative to income. Reducing outstanding EMIs and paying off overdue amounts can lower your FOIR and make you more eligible for new credit.
- Improve your creditworthiness: A credit score around 700 or higher is generally considered strong. Obtain your credit report, identify negative entries or late payments, and address them by settling outstanding bills and EMIs. A higher credit score not only improves approval odds but can also help you obtain a personal loan at lower interest rates.
- Assess EMI affordability: Shorter repayment tenures result in larger monthly EMIs but typically lower overall interest costs. Longer tenures reduce monthly payments but often increase total interest paid. Choose a tenure that matches your cash flow so you can comfortably meet obligations without strain.
- Consider joint loans: Applying with a co-applicant shares responsibility for repayment and can strengthen your application. If one co-applicant has a stronger credit profile, the combined creditworthiness may raise eligibility and secure more favorable interest rates.
- Use the lender’s eligibility calculator: Many lenders provide online loan eligibility calculators. Use these tools to estimate how much you can borrow and which repayment options suit your budget. This helps streamline the application process and reduces surprises during underwriting.
- Meet the lender’s criteria: Beyond credit score and FOIR, lenders check factors like age, income, and employment stability. Ensure you meet the basic eligibility requirements and keep all supporting documents—identity, income proof, bank statements, and employment verification—ready to speed up approval.
Choosing the right lender
There are many lenders offering personal loans, and selecting the right one can have a significant impact on cost and convenience. A suitable lender should offer transparent terms, competitive rates, and a smooth application process. Some fintech platforms focus on small, short-term loans with quick disbursal and simple documentation, which can be helpful when you need funds urgently.
When comparing lenders, consider loan amount ranges, interest rates, processing fees, repayment tenures, prepayment charges, and customer service responsiveness. If fast access to modest funds is important, look for providers that offer instant disbursal and flexible tenures without collateral requirements.
Personal loans can be a useful tool when managed responsibly. Improving your credit profile, reducing existing liabilities, choosing an affordable EMI plan, and selecting a lender that matches your needs will increase the likelihood of approval and help you secure better terms. Keep your documents organized and use the lender’s online tools to understand your eligibility before applying. This approach increases your chances of receiving timely financial support with minimal hassle.