Personal loans are unsecured loans and banks charge high interest rates on them as
there is no collateral involved.The lender also checks whether you have enough
repayment capacity or not. Banks also analyse your credit score and financial history
before they sanction the loan. However, your personal loan application can get a boost if
you keep the following three points in mind.
Ensure you have a healthy credit score
Your credit score is the report card of your financial behaviour. All financial activities
carried by you in the past determine the health of your credit score. Credit score of an
applicant lies anywhere in the range of 300 – 900. The credit score of 720 – 750 and
above is considered as good by most credit bureaus.
If you have a credit score of 750+, most banks will easily approve your Best personal
loan application. However, if you have a credit score of less than 700, it means that you
have not taken care of your finances well. Banks do not consider you as a favourable
borrower as the chances of you repaying the loan is relatively less than that of an
applicant having a healthy credit score.
The best way to improve your credit score is by becoming disciplined financially. Pay-
off all your existing debts as soon as possible. If you use a credit card, make sure you do
not default on your bill payment. You should also keep your credit utilization ratio as
less as possible. The credit score improves gradually and once it is in the range of 720-
750, you can make a fresh application for the personal loan.
Do not make multiple loan applications within 6 months
A lot of loans showcases that you are credit hungry. This is not a good prospect for
banks as more loans mean more chances of default. In case you have taken a loan
recently, wait up to 6 months before applying for a fresh loan.It is best advised that you
keep a gap of around three months between the previous loan closure and a fresh loan
application. This will help you to have some breathing time between two loans.
Also, if you plan to take a loan, you should not make multiple applications at different
banks/NBFCs. It will show that you are desperate for credit. In case your loan
application gets rejected at any of the institutions, your credit score will take a dip and it
will impact your chances of availing loans in future.
Maintain your Debt-to-Income ratio low
The Debt-to-Income ratio is the ratio of your total monthly debts divided by your
monthly salary. It is recommended that you keep this ratio as low as possible, in
addition to a low credit card utilization ratio, if you use a credit card.
The ratio should not breach the level of a maximum of 40% of your salary. However,
most banks prefer applicants whose Debt-to-Income ratio would be 30% after
sanctioning the loan. Let us assume you have a monthly salary of ₹ 50,000. So you
should not spend more than ₹ 20,000 on EMIs. If you have already reached the limit,
there are bleak chances that banks will approve your personal loan application.
It is advisable that you first pay-off your existing loans, if any, and do not apply for the
loan amount that will breach the Debt-to-Income ratio safe limit if you want to get the
loan sanctioned without any hassles.
If you have some queries related to SBI personal loan, The moment you call the number
the bank executives make sure to have a prompt response all your queries and
complaints and give the best solution.